LIBRARY 
Connecticut  Agricultural  College 


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Ser'."".!   ECONOMIC   WORIO   AND 
SSw  IT  MAY  BE   .MPROVED 


3  T153  QQ0fi7b57  5 


This  Book  may  be  kept  out 

TWO  WEEKS 

only  and  is  subject  to  a  fine  of 
TWO  GENTS  a  day  thereafter. 
It  will  be  due  on  the  day  indicated 
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MAYS  1  1937 

Ji  8  0  '42 


"Much  of  luinian  history  is  made  up  of  man's  effort  to  tMape  want  by 
movinp;  himself  to  newer  and  less  densely  jiopulated  areas,  and  later 
by    sending  out    his  tentacles  in   the  form  of  transportation  systems." 


-  r 


THIS  ECONOMIC 
WORLD 

AND  HOW  IT  MAY  BE 
IMPROVED 

By  THOMAS  NIXON  CARVER,  Ph.D.,  LL.D. 

DAVID  A.  WELLS  PROFESSOR  OF  POLITICAL  ECONOMY 
HARVARD  UNIVERSITY 

AND 

HUGH  W.  LESTER,  LL.B. 

COUNSELOR  AT  LAW 


CHICAGO  Sf  NEW  YORK 

A.  W.  SHAW  COMPANY 

LONDON,  A.  W.  SHAW  AND  COMPANY,  LIMITED 

1928 


Xl5  i7 


COPYRIGHT,    1928,    IIY   A.   W.    SHAW    CnMPANY 
PRINTED   IN   THE    UNITED    STATES    OF   AMERICA 


PREFACE 

Economic  progress  seems  to  come  In  successive  stages. 
At  least  there  seems  to  be,  in  each  period  of  progress, 
some  definite  problem  to  be  solved  or  some  definite  evil 
to  be  eliminated.  The  general  problem  of  poverty  has 
in  the  past  seemed  to  be  perennial.  Nevertheless,  it  has 
many  phases,  some  of  which  have  already  been  made  to 
disappear.  Each  stage  of  progress  has  consisted  in  the 
solving  of  some  single  phase  of  that  great  problem. 

The  next  stage  in  economic  progress,  the  one  which 
lies  immediately  ahead  of  us,  will  be  that  in  which  the 
wages  of  the  mass  of  manual  workers  will  be  raised  to  a 
level  which  will  give  not  only  comfort  and  decency  but 
some  degree  of  culture  as  well.  In  more  general  terms, 
It  will  be  the  stage  in  which  those  who  follow  one  occu- 
pation will  become,  on  the  average,  approximately  as 
prosperous  as  those  who  follow  another.  After  this  is 
achieved  it  may  be  that  the  next  problem  will  be  that  of 
equalizing  prosperity  among  different  persons  in  the  same 
occupation,  or  of  eliminating  the  individual  failures  in  an 
occupation  which  is  generally  prosperous. 

Not  many  reformers  are  now  interested  in  this  future 
phase  of  the  poverty  problem.  In  general,  they  inveigh 
only  against  a  condition  in  which  the  general  or  average 
prosperity  In  a  whole  occupation  or  group  of  occupations 
Is  low.  Specifically,  they  object  to  low  wage  rates.  The 
fact  that  one  lawyer  fails  while  another  succeeds  does 

iii 


iv  THIS  ECONOMIC  WORLD 

not  distress  them  so  much  as  the  fact  that  the  average 
prosperity  of  a  whole  occupation  is  low  while  that  of  an- 
other is  high.  The  economic  problem  of  the  present  and 
the  immediate  future,  therefore,  is  that  of  removing  occu- 
pational poverty.  The  future  must  take  care  of  the  prob- 
lem of  individual  failures  in  a  generally  prosperous  occu- 
pation. 

The  present  book  is  a  contribution  to  the  solution  of 
the  problem  that  is  immediately  before  us.  Such  a  solution 
must  begin  with  a  diagnosis  of  the  actual  state  of  This 
Economic  World.  It  must  end  with  a  program  for  the 
removal  of  the  causes  of  the  evil  which  everyone  desires 

to  see  cured. 

Thomas  Nixon  Carver 


CONTENTS 
Preface iii 

I 

The  Great  Escape 3 

II 

"Somehow  Good'^ 70 

III 
The  Present  State  of  Liberalism no 

IV 
The  Competitive  System 138 

V 

The  Balance  between  Liberty  and  Authority     .     .     168 

VI 

Economic  Equality 190 

VII 
Equality  before  the  Law 220 

VIII 
The  Necessitous  Man  and  the  Law 261 

IX 
The  Present  Status  of  the  Population  Problem  .    .     280 

V 


vi  THIS  ECONOMIC  WORLD 

X 

The  Supposed  Necessity  for  an  Industrial  Reserve 

Army 316 

XI 
The  Inventor  and  the  Investor 352 

XII 

The  Last  Fifty  Years  in  the  United  States    .    .     .    361 

XIII 

How  Long  Will  This  Diffusion  of  Prosperity  Last, 

AND  What  Will  It  Do  to  Us? 391 

Index 419 


THIS  ECONOMIC  WORLD 


THE  GREAT  ESCAPE 

INSTEAD  of  being  the  dismal  science,  economics  is  the 
most  fascinating  subject  in  the  world  because  it  has 
to  do  with  the  greatest  of  all  dramas — that  of  man's 
escape  from  want.  It  has  often  been  pointed  out  that 
the  essence  of  all  drama  is  escape  or  attempted  escape, 
either  from  the  machinations  of  a  personal  villain  or  from 
a  villainous  combination  of  circumstances  called  fate. 
Escape  is  one  of  the  great  thrills  we  get  out  of  life,  and 
men  everywhere  stir  their  racial  memories  by  devising  real 
or  imaginary  villains  or  traps  for  the  sheer  fun  of  escap- 
ing. The  small  child  asks  to  be  chased  and  squeals  with 
delight  as  she  escapes;  small  boys  skate  over  thin  ice; 
grown  men  hazard  their  fortunes  by  gambling — all  In 
order  that  they  may  have  the  thrill  of  escaping  from 
something.  The  stories  of  universal  appeal,  from  Little 
Red  Riding  Hood  and  Jack  the  Giant  Killer  up  to  the 
highest  tragedies,  are  stories  of  escape  or  attempted 
escape.  Even  our  spiritual  struggles  are  dramatized  Into 
stories  of  escape.  The  Pilgrim's  Progress,  for  example, 
is  the  story  of  Christian's  escape  from  the  City  of  De- 
struction, though  the  interest  is  sustained  by  a  number  of 
minor  escapes,  beginning  with  the  Wicket  Gate,  whereon 
was  written  "Flee  from  the  wrath  to  come,"  and  ending 
with   Christian's  final  escape   from  the  river  which  he 


4  THIS  ECONOMIC  WORLD 

found  deeper  or  shallower  according  as  his  faith  grew 
weaker  or  stronger. 

Whatever  the  purpose  of  life  may  be,  physical  sub- 
sistence is  one  of  the  first  requisites  for  the  fulfillment  of 
that  purpose.  Until  the  problem  of  subsistence  Is  solved, 
other  purposes  must  wait.  Three  things  of  so  large  and 
bulky  a  nature  as  to  be  generally  appreciated  are  abso- 
lutely necessary  for  physical  existence:  air,  water,  and 
food.  There  are  also  a  number  of  less  bulky  things 
which  only  a  physiologist  can  explain.  Fortunately, 
there  Is  enough  air;  therefore  the  want  of  air,  except  in 
rare  instances,  has  never  been  considered  a  problem. 
There  are  considerable  areas  also  where  there  Is  enough 
water.  Men  have  elected,  for  the  most  part,  to  live  in 
those  areas;  consequently  the  problem  of  water  is  not  a 
serious  one,  though  there  are  places  where  water  has  to 
be  artificially  supplied,  that  is,  conducted  from  areas  of 
abundance  to  areas  of  scarcity.  The  problem  of  physical 
subsistence,  therefore,  has  generally  narrowed  Itself  down 
to  the  problem  of  food,  which.  In  most  places  where  men 
have  elected  to  live,  is  so  scarce  as  to  create  a  problem 
that  is  serious. 

Throughout  the  greater  part  of  human  history  the 
problem  of  want  has  been  the  problem  of  food.  The  first 
great  economic  struggle  of  mankind  has  been  the  struggle 
for  food.  Of  course,  other  wants  arise.  In  fact,  It  is  a 
general  characteristic  of  the  human  animal  that  his  wants 
increase  both  In  number  and  Intensity.  As  soon  as  one 
want  is  supplied,  another  rises  to  the  level  of  consciousness 
and  becomes  at  once  a  driving  force.     Throughout  this 


THE  GREAT  ESCAPE  5 

discussion  I  shall  use  the  word  "want"  instead  of  "hun- 
ger" with  the  understanding  that  the  most  primitive  and 
persistent  form  of  want  is  the  need  for  food. 

The  story  of  human  progress,  in  Its  earlier  stages  at 
least,  is  a  story  of  man's  escape  from  want.  The  villain 
Want,  sometimes  described  as  the  Wolf  of  Hunger,  has 
been  a  most  persistent  villain  and  has  not  been  perma- 
nently foiled  by  any  single  trick.  We  have  extricated 
ourselves  from  his  clutches  by  a  number  of  different  ex- 
pedients. To  one  who  sees  this  major  drama  as  a  whole, 
the  story  of  these  successive  extrications  from  the  traps  of 
hunger  is  more  fascinating  than  any  minor  drama  that 
was  ever  staged. 

However,  it  is  not  necessary  to  make  the  story  too  sen- 
sational by  transforming  want  into  a  personal  villain. 
Combinations  of  circumstances  have  enmeshed  the  human 
race  from  the  beginning,  and  It  Is  the  fight  against  these 
circumstances  that  should  really  thrill  us.  No  other 
creature  lower  than  man  has  ever  been  able  to  elude 
them.  With  these  creatures,  therefore,  the  great  drama 
is  tragedy;  circumstances  are  too  much  for  them.  They 
do  not  escape.  The  story  of  man's  escape  from  want  is 
the  story  of  a  series  of  successes  In  gaining  control  of 
these  circumstances,  of  mastering  fate  instead  of  being 
overwhelmed  by  it. 

The  first  of  these  circumstances  Is  the  fact^  that  the 


■■•  It  may  be  objected  that  these  facts  are  mere  truisms  and  therefore 
of  no  significance.  But  truisms  are  the  most  significant  things  in  the 
world  to  anyone  except  a  sensationalist  or  a  newsmonger.  Truisms  are 
at  least  true,  which  is  more  than  can  be  said  of  most  sensational  state- 
ments.    Besides,  they  are  generally  of  such  an  elementary  nature  as  to 


6  THIS  ECONOMIC  WORLD 

natural  or  spontaneous  productivity  of  a  given  area  of 
land  is  limited.  Only  a  limited  number  of  blades  of  grass 
will  grow  spontaneously  (that  is,  without  cultivation)  on 
any  given  acre.  That  being  the  case,  only  a  limited  num- 
ber of  wild  animals  can  live  on  that  wild  grass,  and,  in 
turn,  only  a  limited  number  of  wild  men  can  live  on  those 
wild  animals.  Or,  if  men  try  to  live  on  wild  fruits,  roots, 
and  other  edible  products,  the  same  fact  faces  them :  only 
a  limited  quantity  of  these  will  grow  on  any  area.  Conse- 
quently, if  too  many  people  should  try  to  live  in  that  area, 
there  would  not  be  food  enough  for  them  all,  and  want 
would  overtake  them. 

Another  great  fact,^  of  equal  importance,  is  that  a 
"natural"  birth  rate  exceeds  a  "natural"  death  rate.  For 
purposes  of  this  discussion  I  assume  the  privilege  of  de- 
fining the  word  "natural"  as  used  in  the  above  proposition. 
By  a  "natural"  birth  rate  I  mean  a  birth  rate  that  is  un- 
controlled by  rational  or  prudential  considerations — one 
that  automatically  results  wherever  inherited  instincts  or 
impulses  are  not  repressed  or  counteracted  by  other 
motives  with  which  they  come  in  conflict — such  a  birth 
rate  as  we  see  everywhere,  not  only  in  the  subhuman  but 
in  the  human  world  where  rational  control  or  suppression 
is  absent.  By  a  "natural"  death  rate  I  mean  such  a  death 
rate  as  would  exist  if  every  individual  died  what  is  some- 
times called  a  "natural"  as  distinguished  from  a  tragic 


be  universally  recognized.  The  consequences  which  follow  from  some 
of  these  elementary  facts  are  sometimes  startling  enough  to  satisfy  even 
the  sensationalist,  if  he  has  the  intelligence  to  understand  them. 

^  See  the  preceding  footnote. 


THE  GREAT  ESCAPE  7 

death;  or  if  every  death  resulted  from  the  "natural" 
process  of  growth,  maturity,  old  age,  and  decay,  and  not 
from  war,  accident,  disease,  or  starvation. 

A  given  pair,  for  example,  can  die  only  once  each, 
making  a  total  of  two  deaths;  but  if  they  live  out  their 
natural  span  of  life  and  if  they  do  not  repress  their  in- 
stincts, they  will  produce  more  than  two  children.  If 
these.  In  turn,  live  out  their  natural  span  of  life — that  is, 
if  they  do  not  die  tragic  deaths — and  if  they  do  not  re- 
press their  instincts,  they  will,  in  turn,  produce  more  than 
two  children  per  pair,  and  so  on  and  so  on,  world  without 
end. 

Putting  these  two  great  facts  together,  namely,  the 
limited  amount  of  food  that  will  grow  naturally  In  a 
given  area  and  the  fact  that  the  natural  birth  rate,  as 
described  above,  is  higher  than  the  natural  death  rate,  we 
have  a  picture  of  the  trap  In  which  humanity  Is  always 
about  to  be  caught.  Not  only  the  most  interesting  but 
the  most  important  phase  of  human  history  is  the  account 
of  the  ways  by  which  men  have  escaped  from  this  trap. 
I  shall  try  to  bring  this  story  under  a  series  of  extrications 
which  serve  as  the  different  scenes  in  the  great  drama.  It 
is  Impossible  to  arrange  these  In  what  Is  necessarily  the 
chronological  order  because  there  Is  so  much  overlapping. 
I  shall  arrange  them  rather  In  what  seems  to  be  the  order 
of  their  primitiveness. 

Extrication  Number  i  :  Scattering 

In  view  of  the  fact  that  only  a  limited  number  of  men 
could  live  on  the  natural  produce  of  a  given  area  of  land, 


8  THIS  ECONOMIC  WORLD 

the  first  expedient  that  would  suggest  itself  was  that  of 
using  more  land.  By  spreading  out  and  utilizing  the 
natural  produce  of  more  and  more  acres,  more  and  more 
people  could  live.  Even  the  plants  have  adopted  this 
device,  because  they  face  the  same  fundamental  necessity. 
Every  plant  has  some  means  of  spreading  Itself  by  scat- 
tering its  seeds.  The  thistledown  carrying  its  seeds  on 
the  wind,  the  cocoanut,  whose  seeds  can  float  long  dis- 
tances on  salt  water,  and  thousands  of  other  illustrations 
can  be  given.  Of  course,  with  creatures  that  possess 
organs  of  locomotion,  the  problem  is  easy.  Much  of 
human  history  is  made  up  of  man's  effort  to  escape  from 
want  by  spreading  out,  moving  himself  to  newer  and  less 
densely  populated  areas,  and  later  by  sending  out  his 
tenacles  In  the  form  of  transportation  systems  to  bring 
food  from  wider  and  wider  areas  to  his  densely  populated 
centers.^ 

This  method  of  escape,  however.  Is  not  a  final  solution. 
Thousands  of  years  ago  the  entire  earth  had  become 
populated.  There  has  been  no  time  within  recorded  his- 
tory when  there  was  any  unoccupied  portion  of  the  earth 
to  which  men  could  migrate.  All  the  migrations  of  which 
we  have  any  historical  record  have  resulted  In  the  dis- 
possession or  partial  dispossession  of  one  group  of  people 

^  The  great  pigeon  roosts  wliich  once  existeii  in  our  great  interior  valley 
were  made  possible  by  the  fact  that  the  wild  pigeons  were  powerful  fliers 
and  could  transport  themselves  to  distant  feeding  groimds  and  back  to 
their  roosts  every  day,  thus  foraging  over  a  wiile  area.  Our  great  cities 
might  be  regarded  as  inverted  pigeon  roosts,  made  possible  by  our  trans- 
portation systems  which,  instead  of  carrying  the  people  to  the  sources  of 
food,  transport  the  food  to  the  people.  In  this  case  as  well  as  in  that  of 
the  pigeon  roost,  the  dense  population  forages  over  vast  areas. 


THE  GREAT  ESCAPE  9 

by  another.  The  American  continent,  for  example,  was 
not  unoccupied  when  Europeans  began  coming..  We  may 
say  that  It  was  Inefficiently  occupied.  In  the  sense  that  It 
took  a  great  deal  of  land  to  support  one  person  by  the 
method  of  hunting  and  fishing,  as  carried  on  by  the 
Indians.  The  same  area  could  support  a  hundred  men 
under  the  European  system  of  using  land.  But  since 
things  eventually  tend  to  even  up  In  this  respect,  that  Is, 
since  differences  In  the  methods  of  utilizing  land  tend  to 
narrow  down,  It  will  become  apparent  that  the  method  of 
migration  Is  no  final  solution  of  the  problem.  It  merely 
means  wars  of  conquest,  or  else  the  peaceful  displacement 
of  one  race  by  another. 

Something  of  the  same  sort  results  when  tentacles  are 
sent  out  Into  distant  regions  In  the  form  of  transportation 
and  mercantile  systems.  Commercial  rivalries  develop, 
and  Instead  of  colonization  and  wars  of  territorial  con- 
quest we  have  either  wars  or  peaceful  struggles  for 
markets  and  spheres  of  commercial  Influence;  the  nation 
that  loses  must  then  manage  to  live  on  the  produce  of  a 
smaller  area  of  land. 

Extrication  Number  2  :  Work 

Not  only  is  it  possible  to  get  more  food  by  spreading 
over  more  land  so  long  as  there  Is  more  land  to  be  had; 
it  is  also  possible  to  increase  the  amount  of  food  that  will 
grow  on  an  acre  or  any  given  area  of  land.  This  means 
work,  or  cultivation.  This  necessity  is  the  subject  of  one 
of  the  earliest  of  all  literary  dramas.    From  an  Imaginary 


10  THIS  ECONOMIC  WORLD 

garden  in  which  there  was  no  overpopulation  and  there- 
fore no  want,  men  were  not  only  cast  out  and  forced  to 
wander  as  soon  as  numbers  increased;  they  were  forced  to 
go  to  work.  In  the  sweat  of  their  brows  they  had  to  eat 
their  bread.  Most  of  our  moral  and  judicial  problems 
also  grew  out  of  this  situation.^  Want  creates  rivalry. 
Where  there  is  not  so  much  of  anything  as  people  want, 
their  interests  come  into  conflict,  and  if  they  think  at  all 
they  begin  to  think  about  such  things  as  justice,  equity, 
fair  play,  and  a  sharing  of  the  thing  which  is  scarce. 

Cultivation  means  essentially  three  things:  first,  de- 
stroying useless  plants,  commonly  called  weeds,  in  order 
to  give  more  room  for  the  useful  plants,  that  is,  the  plants 
useful  to  man;  second,  preparing  a  better  seed  bed  for 
these  useful  plants  in  order  that  they  may  grow  more 
vigorously;  third,  selecting  and  planting  seed  in  order  to 
improve  the  quality  or  the  usefulness  of  these  plants. 
This  is  the  essence  of  all  sound  agriculture  in  so  far  as  it 

^  Cf .  T.  N,  Carver,  Essays  in  Social  Justice  (Cambridge:  The  Harvard 
University  Press,  iQiS),  ch.  i.  The  same  idea  is  remarkably  well  ex- 
pressed by  Roscoe  Pound  in  the  following  language: 

"From  an  earthly  standpoint,  the  central  tragedy  of  existence  is  that 
there  are  not  enough  of  the  material  goods  of  existence,  as  it  were,  to  go 
around;  that  while  individual  claims  and  wants  and  desires  are  infinite, 
the  material  means  of  satisfying  them  are  finite;  that  while,  in  common 
phrase,  we  all  want  the  earth,  there  are  many  of  us  but  there  is  only  one 
earth.  Thus  we  may  think  of  the  task  of  the  legal  order  as  one  of  pre- 
cluding friction  and  eliminating  waste;  as  one  of  conserving  the  goods  of 
existence  in  order  to  make  them  go  as  far  as  possible,  and  of  precluding 
friction  and  eliminating  waste  in  the  human  use  and  enjoyment  of  them, 
so  that  where  each  may  not  have  all  that  he  claims,  he  may  at  least  have 
all  that  is  possible.  Put  in  this  way,  we  are  seeking  to  secure  as  much  of 
human  claims  and  desires — that  is,  as  much  of  the  wiiole  scheme  of  inter- 
ests— as  possible,  with  the  least  sacrifice  of  such  interests." 

From  Roscoe  Pound,  Spirit  of  the  Common  Laiv  (Boston:  Marshall 
Jones  and  Company,  1921),  p.  196. 


THE  GREAT  ESCAPE  ii 

relates  to  the  basic  form  of  agriculture,  namely,  plant 
husbandry. 

But  even  this  is  not  a  complete  escape,  because  even 
though  by  killing  weeds  you  can  make  it  possible  for  larger 
numbers  of  useful  plants  to  grow,  and  by  furnishing  them 
a  better  seed  bed  you  can  increase  their  growth  and 
density,  and  by  the  selection  of  seed  you  can  increase  their 
utility  and  life-sustaining  power,  nevertheless  in  any  state 
of  knowledge  there  is  a  limit  to  this.  It  is  doubtful  if 
there  is  an  authentic  case  of  a  hundred  bushels  of  wheat 
being  grown  on  an  acre.  Several  hundred  bushels  of 
Indian  corn  to  the  acre  have  been  grown,  but  no  one  has 
yet  grown  anything  like  five  hundred  bushels,  even  on  an 
experiment  plot  with  all  the  aids  that  the  present  state  of 
science  will  furnish.  The  necessary  result  of  this  is  that, 
if  numbers  keep  on  increasing,  it  is  only  a  question  of  time 
when  the  limit  will  be  reached  at  which  as  many  people 
will  be  deriving  their  subsistence  from  a  given  area  of 
land  as  that  land  will  support. 

The  situation  is  somewhat  obscured,  of  course,  by  the 
fact  that  historically  both  the  first  and  the  second  of  these 
extrications  were  in  progress  at  the  same  time.  Densely 
populated  areas  seem  to  be  self-supporting,  whereas,  as  a 
matter  of  fact,  they  are  deriving  their  subsistence  from 
other  areas  by  means  of  their  transportation  systems.  It  is 
doubtful  if  a  country  like  England  could  live  from  the 
produce  of  its  own  soil;  certainly  it  could  not  live  so 
easily  and  well  as  it  now  does  when  it  is  able  to  bring  food 
from  the  ends  of  the  earth.  Even  if  the  whole  of  Eng- 
land could  derive  all  its  food  from  its  own  soil,  it  is  quite 


12  THIS  ECONOMIC  WORLD 

certain  that  the  city  of  London,  in  the  present  state  of 
science,  could  not  live  on  the  produce  of  the  soil  com- 
prised within  its  limits.  But  in  proportion  as  it  gets  its 
food  from  other  areas,  It  reduces  the  number  of  people 
who  can  live  In  those  areas  on  their  own  native  products. 
In  other  words,  these  great  centers  of  dense  population 
require  that  there  shall  be  other  areas  of  sparse  popula- 
tion to  produce  a  surplus  of  food  for  export  to  the  densely 
populated  centers. 

Even  before  the  absolute  limit  of  food  production  on  a 
given  area  is  reached,  there  is  a  gradual  weakening  of 
Nature's  response  to  man's  efforts  to  increase  that  pro- 
duction. On  the  same  piece  of  soil  and  under  the  same 
conditions  of  climate  it  takes  more  than  twice  as  much 
work  to  produce  thirty  bushels  of  wheat  on  an  acre  as  it 
takes  to  produce  fifteen,  much  more  than  twice  as  much 
work  to  produce  sixty  bushels  as  thirty,  and  it  is  doubtful 
if  any  amount  of  work  could  force  any  acre,  to  say  noth- 
ing of  the  average  acre,  to  yield  one  hundred  and  twenty 
bushels.  This  is  sometimes  called  the  law  of  diminishing 
returns.  That  Is,  the  limit  of  the  productivity  of  an  acre 
of  land  is  not  arrived  at  suddenly.  You  cannot  go  on  in- 
creasing the  yield  In  exact  proportion  as  you  increase  the 
labor  employed  in  cultivation  until  you  reach  the  absolute 
limit  and  then  suddenly  find  that  no  further  increase  is  pos- 
sible. The  land  begins  to  show  signs  of  approaching  Its 
limit  long  before  the  limit  is  finally  reached. 

Migration  and  labor  are  not  only  the  most  primitive 
of  the  methods  of  extricating  ourselves  from  the  circum- 
stances that  bring  want;  they  might,  in  a  special  sense,  be 


THE  GREAT  ESCAPE  13 

said  to  include  all  the  others  except  birth  control.  How- 
ever, some  of  the  others  are  so  important  in  themselves  as 
to  deserve  separate  mention. 

Extrication  Number  3 :  Organization 

Organization  is  only  a  special  way  of  working,  as  com- 
merce is  a  special  way  of  spreading.  Nevertheless,  by 
adopting  this  special  method  of  working,  one  of  the 
greatest  of  all  extrications  has  been  effected.  Organiza- 
tion means  teamwork.  Men  early  discover  the  advan- 
tage of  teamwork,  associated  effort,  and  specialization. 
So  important  is  this  factor  of  teamwork  that  it  is  the  sub- 
ject of  many  special  lines  of  study.  It  is  at  this  point  that 
sociology,  for  example,  and  all  the  social  sciences  branch 
off  from  economics.  Sociology  is  essentially  a  study  of 
human  teamwork — a  vast  subject  in  itself  with  many 
ramifications.  No  attempt  will  here  be  made  to  discuss 
this  vast  subject  in  detail.  A  few  main  points,  however, 
should  be  mentioned. 

One  requisite  for  effective  teamwork  is  a  code  of  sig- 
nals, commonly  called  a  language.  A  very  simple  code 
serves  the  purpose  of  the  lower  creatures,  whose  team- 
work is  of  a  very  simple  kind.  Among  certain  insects 
there  are,  for  example,  workers  and  fighters,  but  among 
the  workers  there  is  very  little  organization  or  specializa- 
tion. One  worker  does  about  what  every  other  worker 
does.  In  human  society  the  workers  are  most  intricately 
organized.  Similarly,  among  the  fighters  of  certain  ant 
colonies  there  is  very  httle  organization,  and  such  as  there 


14  THIS  ECONOMIC  WORLD 

is  is  not  in  any  way  to  be  compared  with  an  organization 
of  human  fighters.  The  survival  value  of  teamwork 
carries  with  it  many  other  survival  values,  such  as  that  of 
organs  of  speech,  of  the  reshaping  of  the  skull,  the  jaws, 
and  the  lips  in  order  to  make  an  elaborate  code  of  signals 
possible.  Since  we  are  well  organized,  there  is  no  longer 
any  advantage  in  having  eyes  on  each  side  of  the  head  so 
as  to  see  in  all  directions.  The  different  members  of  the 
team  can  each  watch  in  a  different  direction.  Hav-ing  both 
eyes  in  front  so  that  they  can  be  focused  gives  each  per- 
son some  increased  power  of  scrutiny  and  concentration, 
and  this  in  turn  facilitates  specialization. 

Through  organization  and  specialization  both  migra- 
tion and  work  can  be  carried  on  much  more  successfully 
than  without  organization.  The  unorganized  and  unor- 
ganizable  members  of  the  human  race  have  long  ago  van- 
ished before  the  superior  competing  power  of  the  organ- 
izable.  Righteousness  comes  more  and  more  to  mean 
mere  organizability,  or  the  ability  to  fit  into  a  great  or- 
ganization. This  kind  of  righteousness  therefore  pos- 
sesses survival  value  and  tends  inevitably  to  cover  the 
earth  as  the  waters  cover  the  bottom  of  the  great  deep. 
It  has  the  power  to  become  universal,  not  so  much  because 
it  conforms  to  our  own  ideals  as  because  it  has  more  sur- 
vival value  than  its  opposite. 

Extrication  Number  4:  Protecting  Production 

AGAINST   PrEDATION 

One  of  the  most  important  products  of  organization  is 
that  of  standardization  of  individual  conduct,    lliis  is  so 


THE  GREAT  ESCAPE  15 

important  that  it  deserves  to  be  mentioned  as  one  of  the 
great  extrications  irr  our  drama.  In  the  same  sense  that 
other  creatures  are  sometimes  called  predatory,  man  is 
himself  a  predatory  animal.  That  is,  he  will  not  scruple 
to  prey  upon  others,  especially  when  driven  by  necessity 
or  as  a  means  of  eluding  want.  Effective  teamwork  re- 
quires that,  among  members  of  the  team  at  least,  preda- 
tion  shall  cease.  The  team  that  permits  some  of  its  mem- 
bers to  live  at  the  expense  of  others  cannot  be  a  very  suc- 
cessful team.  One  great  line  of  policy  must  therefore  be 
adopted  by  every  great  society  or  every  society  that  hopes 
to  become  great.  It  must  protect  production  against 
predation.  All  legal  systems  or  governmental  policies 
that  are  worth  keeping  must  aim  at  this  as  their  central 
purpose. 

If  notice  can  be  served  upon  each  individual  that  he 
will  be  permitted  to  gain  the  full  benefit  of  his  own  pro- 
ductive activity  and  shall  not  be  dispossessed  by  men  of 
violence  or  fraud,  effective  teamwork  in  the  solution  of  the 
problem  of  want  becomes  possible.  In  so  far  as  this  rule 
is  made  effective,  every  individual  who  wants  a  living  must 
produce  it  by  some  sort  of  useful  action.  No  energy  is 
then  wasted,  either  in  predatory  effort  or  in  protecting 
one's  self  against  the  predation  of  others.  Everybody  is 
encouraged  to  be  doing  the  most  useful  and  productive 
things.  Where  that  happens,  the  largest  possible  number 
of  useful  things  will  be  produced,  and  there  will  be  the 
least  danger  of  want. 

There  are  some  forms  of  predation,  or  something  that 
looks  very  much  like  it,  which  may  promote  production  in 


i6  THIS  ECONOMIC  WORLD 

others  and  which  therefore,  paradoxical  as  it  may  seem, 
may  be  said  to  be  productive.  Even  if  we  exclude  from 
consideration  the  benevolent  despot  whose  benevolence 
may  be  said  to  cleanse  his  despotism  from  the  taint  of 
predation,  there  is  still  to  be  considered  the  grasping 
tyrant,  or  even  the  enterprising  bandit,  who  sees  that  the 
most  profitable  kind  of  banditry  is  to  build  up  a  prosper- 
ous community  in  order  that  there  may  be  better  picking 
for  himself.  To  begin  with,  he  must  eliminate  the  com- 
petition of  other  predacious  persons  and  thus  achieve  a 
monopoly  of  predation.  By  exterminating  all  other 
bandits,  as  well  as  common  thieves,  swindlers,  and  drunk- 
ards, and  giving  all  his  victims  an  assurance  that  they  shall 
not  be  molested,  either  by  his  agents  or  by  his  rivals,  so 
long  as  they  pay  a  reasonable  tribute  to  him,  he  may  en- 
courage industry,  sobriety,  and  thrift  to  such  an  extent  as 
enormously  to  increase  his  own  income.  A  wise  and  enter- 
prising bandit  would  have  at  least  as  much  reason  for 
taking  good  care  of  his  human  live  stock  as  any  animal 
husbandman  has  for  looking  after  interest  of  his  flocks 
and  herds.    "Poor  people,  poor  king." 

While  such  a  bandit  would  be,  in  the  strictest  sense,  a 
predator,  yet  if  he  succeeded  in  eliminating  all  competi- 
tion, there  might  be  much  less  preying  in  the  aggregate 
and  therefore  more  encouragement  to  production  than  if 
he  did  not  exercise  his  predatory  powers. 

Again,  even  if  the  predacious  despot  has  no  such  states- 
manlike qualities  but  is  merely  interested  in  extracting 
what  he  can  from  his  neighbors,  there  may  sometimes  be 
a  residue  of  good  from  his  predation.    If  he  lords  it  over 


THE  GREAT  ESCAPE  17 

a  considerable  population  In  a  rich  river  valley,  and  If  the 
people  around  him  use  up  whatever  prosperity  comes  to 
them  by  rapid  multiplication  of  numbers,  they  will,  if  left 
to  themselves,  multiply  up  to  the  limits  of  physical  sub- 
sistence. Such  people  would  live  not  much  above  the 
level  of  beasts.  Even  If  some  few  peaceful  individuals 
showed  a  disposition  to  live  a  little  better,  the  ravenous 
mass  around  them  would  not  let  them  do  so.  In  such  a 
situation  as  that,  nothing  but  superior  fighting  power 
could  guard  a  surplus  from  the  covetousness  of  the  reck- 
less breeders  and  gluttonous  consumers.  A  great  despot 
might  not  only  protect  his  own  surplus;  he  might  even 
force  the  rest  to  produce  more  than  they  consumed  by  the 
direct  method  of  compelling  them  to  give  him  a  part  of 
what  they  produced.  They  would  then  have  to  live  on  the 
fraction  that  was  left  to  them.  If  they  could  not,  nature 
would  thin  them  out  until  they  could.  The  smaller  num- 
ber would  live  as  well  after  being  robbed  as  the  larger 
number  could  if  they  were  not  robbed.  Freedom  from 
despotism  would  merely  mean  larger  numbers,  not  a 
higher  standard  of  living.  Meanwhile  the  despot  would 
have  a  surplus  which  he  could  devote,  if  he  were  so  dis- 
posed, to  something  besides  keeping  alive.  Much  of  the 
splendor  of  all  ancient  civilizations  is  to  be  accounted  for 
in  this  way.  Sometimes,  however,  it  was  a  despotic  class, 
as  in  Athens,  or  more  notably  in  Sparta,  instead  of  a  des- 
potic person,  that  did  the  preying  upon  the  common  mass 
of  humanity. 

The  closest  present-day  parallel  to  the  old-time  predator 
is  the  politician  who  entrenches  himself  behind  a  political 


i8  THIS  ECONOMIC  WORLD 

organization  and  sells  protection  to  producers  against 
all  smaller  predators — accepting  the  highest  bid.  If  he 
is  sufficiently  farsighted  and  statesmanlike,  he  will,  of 
course,  suppress  competition  in  predation  and  sell  protec- 
tion to  genuine  producers.  The  latter  may  find  it  cheaper 
to  pay  tribute  in  return  for  such  protection  than  to  rely 
wholly  upon  the  less  efficient  services  of  tax-supported 
magistrates  and  administrators. 

If  the  grafting  politician  is  shortsighted  and  unstates- 
manlike,  he  is  likely  to  sell  protection  to  smaller  predators. 
This  Is  a  shortsighted  policy  because  It  tends  to  destroy 
the  ultimate  source  of  income,  which  is  production.  The 
lesser  predators  must,  of  course,  get  their  incomes  from 
producers.  They  can  no  more  live  by  preying  upon  one 
another  than  the  inhabitants  of  that  famous  island  could 
make  a  living  by  taking  in  one  another's  washing.  But 
the  more  these  lesser  predators  increase  in  numbers,  the 
more  they  discourage  production  and  thus  cut  off  the 
source  of  income  of  all  predators.  The  truly  wise  preda- 
tor, therefore,  will,  as  Macchiavelli  long  ago  pointed  out, 
suppress  competition  and  sell  his  own  protection  against 
all  lesser  predators  to  genuine  producers,  to  the  end  that 
production  may  increase  and  the  source  of  his  income  be 
enlarged. 

Hov/ever,  even  though  something  might  be  accom- 
plished by  an  enlightened  despotism,  whether  benevolent 
or  unbenevolent,  or  whether  ancient  and  militant  or  mod- 
ern and  political,  it  is  certain  that  more  can  be  accom- 
plished where  all  predation  is  repressed  than  where  its 
net  quantity  Is  merely  decreased  by  the  monopolizing  of 


THE  GREAT  ESCAPE  19 

predation  by  an  individual  or  class.  Besides,  escape  from 
want  by  way  of  predation  can  never,  by  any  possibility,  be 
more  than  the  escape  of  a  few  at  the  expense  of  the  many. 
The  other  ways  of  escape,  especially  if  they  are  accom- 
panied by  a  complete  suppression  of  all  predation,  make  it 
possible  for  all  to  escape  from  want. 

Failure  to  see  the  difference  between  getting  rich  by  pre- 
dacious methods  and  getting  rich  by  productive  methods 
is  at  the  bottom  of  much  of  the  radical  and  loose  thinking 
of  the  day.  The  one  who  gets  rich  by  production  makes 
others  rich  in  proportion  as  he  gets  rich.  The  richer  he 
gets,  the  richer  he  makes  others,  and  the  more  rich  men  in 
a  country  who  get  rich  by  production,  the  richer  every- 
body else  in  the  country  becomes.  Precisely  the  opposite 
is  true  of  predation.  The  richer  one  becomes,  and  the 
more  there  are  who  get  rich  by  predation,  the  poorer 
everyone  else  becomes. 

The  fundamental  Marxian  mistake  was  the  belief  that 
capital  was  always  essentially  predatory  and  never  pro- 
ductive, that  the  capitalist,  therefore,  always  got  his  in- 
come by  robbing  some  one  else  through  the  agency  of  his 
capital.  If  that  were  true,  all  that  Marx  said  about  the 
tendency  of  capital  to  concentrate  in  a  few  hands  and  of 
non-capitalists  to  become  poorer  and  poorer  until  they 
could  become  no  poorer,  would  have  been  a  logical  con- 
clusion. It  would  then  be  only  a  question  of  time  when 
the  masses  would  overthrow  the  whole  system.  But  be- 
cause that  first  assumption  as  to  the  essentially  predatory 
nature  of  capital  was  not  true,  all  his  conclusions  turned 
out  to  be  diametrically  wrong. 


20  THIS  ECONOMIC  WORLD 

A  parallel  mistake  is  made  by  those  who  Inveigh  against 
competition.  It  is,  of  course,  true  that  competition  among 
predators  Is  destructive,  not  only  to  those  upon  whom 
they  prey,  but  to  the  business  of  predation  Itself.  This 
kind  of  competition  tends  to  dry  up  the  source  of  income 
of  all  predators,  that  is,  it  tends  to  discourage  production. 
Competition  among  producers,  however,  Is  a  different 
thing.  The  more  competitors  there  are,  and  the  more 
intensely  they  compete  In  the  real  work  of  production,  the 
larger  the  total  source  of  income — that  is,  the  larger  the 
sum  total  of  production.  As  President  Hadley  has  put  It, 
the  more  wolves  there  are  looking  for  lambs,  the  worse  It 
is  for  the  lambs;  but  the  more  employers  there  are  look- 
ing for  laborers,  the  better  it  is  for  the  laborers. 

Some  justification  for  the  confusion  of  mind  among 
those  who  object  to  all  competition  Is  found  in  the  fact 
that  we  have  not  yet  succeeded  In  clearly  differentiating 
between  productive  and  predatory  methods  of  doing  busi- 
ness. Many  a  business  enterprise  which,  at  bottom,  is 
genuinely  productive  has  pursued  certain  predatory  poli- 
cies. Whenever  any  producer  tries  to  beat  his  rivals,  not 
by  producing  a  better  product,  or  as  good  a  product  at  a 
lower  expenditure  of  human  energy,  but  by  doing  some 
physical  Injury  to  his  rival's  person  or  property,  by  steal- 
ing his  patents  or  bribing  his  workmen,  by  false  state- 
ments in  salesmanship  and  advertising,  and  a  multitude  of 
other  similar  devices,  he  is  engaging  in  predacious  prac- 
tices. They  who  focus  attention  upon  these  unnecessary 
features  of  our  competitive  system  and  forget  the  basic 
fact  of  productivity  very  naturally  arrive  at  pessimistic 


THE  GREAT  ESCAPE  21 

conclusions  respecting  competition.  This  topic  will  be  dis- 
cussed in  greater  detail  In  Chapter  IV,  "The  Competi- 
tive System." 

Through  the  suppression  of  predatlon  and  the  estab- 
lishment, roughly,  of  the  general  rule  that  economic  re- 
wards shall  be  proportionate  to  production,  the  founda- 
tion is  laid  for  an  economic  system  under  which  all,  and 
not  a  few  only,  may  escape  want.  Predatlon  makes  that 
Impossible. 

Extrication  Number  5 :  Invention 

Invention,  like  organization,  is  another  kind  of  labor, 
but  a  highly  specialized  kind,  and  it  has  been  one  of  the 
most  successful  In  the  evasion  of  want.  The  study  of  in- 
vention Is  a  vast  field  which  becomes  almost  identical  v/ith 
the  study  of  modern  Industrial  history.  There  are  many 
stages  in  the  progress  of  Invention.  Perhaps  the  most  im- 
portant Is  that  of  tapping  new  sources  of  power  by  means 
of  which  greater  things  can  be  accomplished  than  could  be 
accomplished  with  that  limited  amount  of  power  gener- 
ated in  the  human  body  and  delivered  through  the 
muscles. 

In  the  last  analysis,  all  work  consists  in  moving  pieces 
of  matter — from  the  work  of  the  writer  who  merely  trans- 
fers Ink  from  one  place  to  another  to  that  of  an  irrigation 
engineer,  who,  by  moving  clods  and  stones,  is  enabled  In- 
directly to  move  millions  of  tons  of  water  from  one  place 
to  another.  That  Is  about  all  that  men  do  In  a  physical 
sense.     That  is  all  that  a  moving  picture  machine  would 


22  THIS  ECONOMIC  WORLD 

ever  reveal  men  doing.  All  that  the  eye,  as  a  physical 
instrument,  sees  them  doing  is  moving  pieces  of  matter. 
It  is  only  by  reading  into  their  motions  the  idea  of  purpose 
or  plan  that  we  ever  think  we  see  them  doing  anything 
else.  Matter  is  moved  by  power — mechanical  power  or 
foot  pounds  of  pressure.  We  sometimes  say  figuratively 
that  the  mind  of  man  moves  objects  or  that  faith  can  move 
mountains,  but  nothing  is  ever  moved,  from  a  grain  of 
sand  to  a  mountain,  except  through  mechanical  power. 

Indirectly  and  figuratively,  of  course,  the  mind  helps  to 
move  these  objects  by  mechanical  devices.  It  is  the  pres- 
sure of  the  short  end  of  the  lever  under  the  stone  that 
moves  it,  and  it  is  the  pressure  exercised  by  the  fulcrum 
and  by  human  muscles  pressing  on  the  long  end  of  the 
lever  that  moves  the  short  end.  And,  of  course,  it  was 
an  ingenious  mind  that  thought  of  using  the  lever.  It  is 
the  pressure  of  steam  on  the  piston  that  moves  It,  thus 
causing  various  other  objects  to  move.  Ultimately,  the 
assembling  of  the  different  parts  of  the  steam  engine  went 
back  to  human  muscles,  and  it  was  the  mind  that  thought 
of  the  way  and  directed  the  muscles. 

When,  therefore,  new  sources  of  power  were  harnessed 
and  made  to  do  this  work  of  moving  objects,  men  won  a 
great  advantage  in  their  struggle  against  want.  In  the 
order  of  time,  probably  animal  power  was  the  earliest. 
Next  may  have  been  wind  power,  by  which  boats  were 
moved.  Gunpowder  came  fairly  early.  Perhaps  the 
greatest  of  all  sources  of  power  was  steam,  the  means  by 
which  the  energy  in  the  coal  beds  could  be  transformed 
into  mechanical  power.     An  important  rival  of  steam  is 


THE  GREAT  ESCAPE  23 

water  power,  particularly  In  Its  modern  transformation 
Into  electrical  energy.  The  Internal  combustion  engine, 
which  converts  the  energy  of  gasoline  Into  mechanical 
power.  Is  also  a  close  rival  of  the  steam  engine. 

But  with  all  our  mechanical  devices  we  have  not  yet 
greatly  Increased  the  power  of  an  acre  of  land  to  produce 
food.  They  have  enabled  us  to  bring  food  from  wider 
and  wider  areas,  and  they  have  enabled  the  mechanically 
gifted  nations  to  bring  raw  materials  from  the  distant 
parts  of  the  earth  and  work  them  over  cheaply  In  factories 
driven  by  mechanical  power,  and  sell  them  back  again  to 
the  denizens  of  those  sparsely  populated  areas  at  a  good 
profit,  so  that  vast  Indoor  populations  are  enabled  to  live 
on  the  profits  of  the  transaction.  But  In  agriculture,  most 
of  our  mechanical  devices  thus  far  have  merely  had  the 
effect  of  enabling  one  man  to  cultivate  more  acres.  This 
has  facilitated  the  first  great  extrication,  namely,  migra- 
tion or  colonization — spreading  out  over  more  and  more 
land.  Only  a  little  has  been  done  as  yet  in  the  direction 
of  enabling  more  people  to  live  on  the  produce  of  a  given 
area.  Deep-tilling  machines  have  done  a  little  in  this 
direction,  but  the  principal  Increases  in  the  food  producing 
capacity  of  an  acre  of  land  have  been  the  result  of  the  dis- 
covery of  new  and  heavy  yielding  crops,  such  as  Indian 
corn  and  the  potato,  and  of  chemical  fertilizers.  Except 
for  these  two  factors,  very  little  has  been  done  In  the  last 
two  thousand  years  to  Increase  the  food  producing  ca- 
pacity of  a  given  area. 

Obviously,  intensive  development  of  food  sources 
through  Invention  of  mechanical  aids  is  no  final  evasion 


24  THIS  ECONOMIC  WORLD 

of  want.  If  population  continues  to  increase,  food  must 
still  be  drawn  from  wider  and  wider  areas,  and  there  is  a 
limit  to  that.  It  is  clearly  no  answer  to  this  question  to 
say  that  it  will  be  a  long  time  before  that  limit  is  en- 
countered. It  is  only  refusing  to  take  a  long  look  to  reply 
that  the  great  Amazon  Valley  and  other  considerable 
areas  have  great  potential  productivity;  I  agree  to  all 
that.  The  time  is  a  long  way  in  the  future  when  our  in- 
ventiveness will  finally  fail  us  in  our  efforts  to  expand  terri- 
torially and  get  our  subsistence  from  wider  and  wider 
areas.  However,  we  shall  meet  with  several  more  imme- 
diate difficulties  than  that  of  final  overpopulation.  Those 
wider  areas  to  which  we  turn  are  all  occupied,  as  the 
North  American  continent  was  before  the  Europeans 
came.  We  must  either  dispossess  the  natives  or  persuade 
them  to  turn  to  a  new  method  of  utilizing  their  land.  If 
they  prefer  not  to  be  converted  to  a  settled  life  of  agricul- 
ture, we  shall  be  faced  with  the  alternative  of  getting  along 
without  those  new  areas,  or  of  using  some  sort  of  coercion 
upon  those  recalcitrant  inhabitants.  But  even  assuming 
that  we  shall  be  unscrupulous  enough  to  force  those  wide 
areas  into  a  more  intensive  form  of  cultivation,  we  have 
made  but  a  temporary  extrication.  We  have  foiled  the 
villain  for  a  time,  but,  as  In  all  good  melodramas,  the 
villain  still  pursues. 

Extrication  Number  6:  Responsible  Parenthood 

Long  before  any  final  occupation  of  the  entire  globe 
can  take  place,  certain  areas  may  already  tend  toward 


THE  GREAT  ESCAPE  25 

overpopulation.  Migration  is  not  always  possible.  Even 
where  it  is,  it  may  be  attended  with  some  inconveniences, 
such  as  expatriation,  the  hardships  of  pioneering  life,  and 
especially  the  moral  aversion  to  the  extermination  of  the 
natives  of  the  new  territory  to  which  migration  is  pro- 
posed. Even  commercial  expansion  is  attended  with  dif- 
ficulties, especially  if  there  are  rivals  ahead  of  us  who  are 
also  cashing  in  on  their  mechanical  ingenuity  by  exchang- 
ing the  finished  products  of  indoor  industries  for  the  raw 
materials  of  wide  spaces. 

If  we  take  the  extreme  case  of  a  nationality  that  can- 
not migrate  or  expand  commercially,  it  is  a  foregone  con- 
clusion that  the  time  must  arrive,  in  many  cases  has 
already  arrived,  when  population  must  become  stationary. 
A  stationary  population  is  possible  only  where  the  birth 
rate  and  the  death  rate  balance.  If  there  is  a  high  birth 
rate,  there  must  be  a  high  death  rate  to  balance  it,  other- 
wise population  still  increases,  and  if  there  is  to  be  a  low 
death  rate  there  must  also  be  a  low  birth  rate  to  balance 
it.  Any  positive  control  of  the  situation  or  any  real  extri- 
cation from  the  circumstances  that  bring  want  where  ex- 
pansion is  not  possible  necessarily  involves  some  stabiliz- 
ing of  population. 

Among  the  lower  creatures  there  is  no  institution,  cus- 
tom, habit,  or  anything  else  to  control  the  birth  rate;  the 
birth  rate  is  a  physiological  function  as  with  plants;  there- 
fore the  death  rate  rises  to  balance  the  birth  rate,  and 
most  individuals  die  a  tragic  death  in  the  animal  as  well  as 
in  the  plant  world.  In  the  earlier  states  of  human  devel- 
opment the  same  was  true.    The  birth  rate  was  unchecked, 


26  THIS  ECONOMIC  WORLD 

so  that  if  a  tribe  could  not  spread  over  more  territory,  the 
death  rate  had  to  rise  to  balance  the  birth  rate.  If  the 
death  rate  did  not  rise  because  of  one  thing,  It  would  rise 
because  of  another.  In  the  last  analysis,  in  the  absence 
of  all  other  causes  of  a  high  death  rate,  the  sheer  lack  of 
food  brought  it  about — in  other  words,  starvation.^  That, 
of  course,  meant  that  want  had  not  been  evaded;  it  was 
ever  present. 

To  unthinking  creatures  there  can  be  no  fear  of  death 
because  there  is  no  power  of  anticipation,  but  where  there 
is  some  power  of  anticipation  there  is  also  the  power  to 
think  in  terms  of  consequences.  If  the  conditions  of  living 
are  so  hard  as  to  produce  a  stationary  population  by  the 
rise  of  the  death  rate  to  balance  the  birth  rate,  another 
possible  extrication  is  that  of  reducing  the  birth  rate  to 
balance  a  "natural"  as  distinguished  from  a  tragic  death 
rate,  but  this  is  a  very  difficult  problem.  Abortion  and 
infanticide  are,  after  all,  only  other  aspects  of  a  high 
death  rate,  and  contraceptive  devices  were  not  known.  A 
partial  solution  of  the  problem,  however,  is  found  In  what 
we  have  called  parental  responsibility.  If  parents  who 
are  responsible  for  the  existence  of  children  are  made  also 
responsible  for  their  support,  at  least  a  temporary  advan- 
tage is  gained,  even  if  it  is  not  a  complete  and  final  escape. 
A  system  of  parental  responsibility  differentiates  between 
those  who  are  capable  of  meeting  the  new  responsibility 

*^This  phase  of  Malthus'ianism,  while  a  truism,  is  at  least  true,  and  by 
DO  means  lacking  in  significance.  A  good  part  of  our  institutional  and 
moral  development  consists  in  ways  of  avoiding  this  situation. 

This  problem  of  population  pressure  is  considered  at  length  in  Chap- 
ter IX. 


THE  GREAT  ESCAPE  27 

and  those  who  are  not.  Those  who  meet  the  responsi- 
bility wisely  will  not  have  more  children  than  they  can 
provide  for;  those  who  do  not,  will  go  on  at  the  old  rate 
of  multiplication.  For  the  latter,  this  is  no  solution  of  the 
problem.    For  the  former,  it  is  a  partial  solution. 

It  is  obvious  that  parental  responsibility,  especially  on 
the  part  of  the  male  parents,  could  not  exist  or  be  en- 
forced under  promiscuity  and  that  it  could  not  endure  un- 
less encouraged  by  some  provision  which  should  put  the 
means  of  family  support  within  the  control  of  the  family 
group.  Some  form  of  marriage  was  necessary  whereby 
the  male  parent  could  be  identified,  and  also  some  forms 
of  family  control  or  ownership  of  family  property  as  dis- 
tinguished from  communal  property. 

MARRIAGE 

In  the  effort  to  bring  about  responsible  parenthood  we 
find  the  raison  d'etre  of  all  matrimonial  institutions. 

This  does  not  imply  that  they  were  all  consciously  in- 
vented for  this  purpose.  The  sporadic  tendencies  of  hu- 
man behavior  are  almost  infinite  in  their  variety.  But  any 
type  of  matrimonial  Institution  that  even  to  a  slight  de- 
gree created  responsible  parenthood  had  survival  value. 
Promiscuity  then  became  impossible  because  those  tribes 
in  which  matrimonial  institutions  gave  some  degree  of  re- 
sponsibility had  a  better  chance  of  surviving  than  the 
tribes  that  still  practiced  promiscuity,  which  negatives  pa- 
rental responsibility.  If  for  no  better  reason,  promiscuity 
must  have  disappeared  because  the  tribes  that  practiced  It 
were  exterminated  by  the  tribes  that  outgrew  It. 


28  THIS  ECONOMIC  WORLD 

The  inherited  tendency  to  scatter  seed  promiscuously, 
as  do  the  plants  and  animals,  is  so  persistent  as  to  make 
the  suppression  of  promiscuity  one  of  the  most  difficult  of 
all  problems  of  social  control.  At  the  same  time,  the  ne- 
cessity that  promiscuity  in  all  its  forms  should  be  sup- 
pressed if  the  tribe  is  to  escape  starvation  is  so  over- 
whelming as  to  make  this  form  of  social  control  one  of 
the  most  important  in  the  whole  field.  These  two  facts 
taken  together  explain  why,  in  all  those  countries  that 
have  managed  to  escape  want,  the  most  drastic  forms  of 
social  control  are  directed  against  promiscuity  or  toward 
the  enforcement  of  parental  responsibility.  Both  rape  and 
seduction  are  methods  by  which  the  male  may  escape  re- 
sponsibility for  offspring,^  and  both  are  rigidly  punished, 
and  must  be  punished  if  parental  responsibility  is  ever  to 
be  enforced  and  wholesale  want  avoided. 

Even   where   marriage   prevails,    a    great   variety   of 

^  It  is  Interesting  to  note  in  this  connection  that  in  the  whole  field  of 
bisexual  procreation  the  three  predominant  methods  by  which  the  male 
succeeds  in  impregnating  the  female  are,  first,  by  means  of  organs  of  pre- 
hension, second,  by  means  of  organs  of  fascination,  and  third,  by  means  of 
economic  support.  In  our  form  of  civilization  the  first  is  called  rape  and 
severely  punished,  though  it  has  been  sanctioned  in  other  civilizations. 
The  second  is  called  seduction  and  is  also  legally  punished,  though  some- 
times defended  by  those  whose  powers  of  fascination  are  greater  than 
their  powers  of  providing  economic  support.  Fascination  may  take  the 
form  of  displaying  brilliant  colors,  of  sitting  on  a  branch  and  warbling, 
or  of  dancing,  strutting,  and  doing  stunts.  Among  human  beings 
however,  it  is  more  likely  to  take  the  form  of  such  visible  marks  of  sex  as 
beards  and  shaggy  hair,  poetic  rhapsodizing,  and  ardent  lovemaking  in  its 
various  forms.  The  third  method  takes  the  very  practical  form  of  such  a 
formula  as  "with  all  my  worldly  goods  I  thee  endow,"  which  is  the  most 
direct  and  practical  method  of  endowing  motherhood  that  has  yet  been 
invented.  However,  it  works  only  among  tliose  males  wlio  understand 
what  it  means  and  who  take  their  promise  seriously.  Among  others  it  is 
a  mockery  and  destroys  whatever  sanctity  can  properly  belong  to  marriage. 


THE  GREAT  ESCAPE  29 

family  institutions  are  described  for  us  by  the  anthropolo- 
gists. When  we  once  understand  their  function,  however, 
we  need  not  be  confused  by  their  multiplicity.  Certain 
types  perform  the  essential  function  of  creating  parental 
responsibility  better  than  others.  Among  all  those  that 
have  existed,  the  type  which  creates  as  the  legal  family 
unit  what  may  be  called  the  biological  family  is  most  effec- 
tive. That  is,  the  family  consisting  of  a  single  pair  and 
their  offspring  focuses  responsibility  on  the  biological 
parents  more  definitely  than  any  other  type  of  family.^ 
Any  larger  family  or  clan  organization  is  relatively  less 
effective  because  the  larger  group  relieves  the  biological 
parents  of  a  certain  part  of  the  responsibility  of  caring 
for  their  own  offspring.  It  is  no  accident  that  the  escape 
from  want  has  been  more  successful  in  those  parts  of  the 
world  where  the  biological  family  is  also  the  legal  family 
than  in  any  other  parts.  Even  in  these  parts  of  the  world, 
however,  there  are  still  remnants  of  older  ideas  of  kinship 
and  of  family  claims  that  go  far  beyond  the  biological 
family.    This  is  especially  true  of  matters  of  property. 

FAMILY  PROPERTY 

Even  when  the  biological  family  is  definitely  established 
as  the  legal  and  social  unit,  the  escape  from  want  is  only 
partial  and  temporary.    So  long  as  all  families  feed  out  of 

^  Of  course,  both  polygamy  and  polyandry  may  focus  responsibility  for 
the  support  of  children  upon  the  procreant  alone,  where  no  clan  or  larger 
group  relieves  them.  In  the  case  of  polygamy,  the  economic  support  of  the 
male  parent  is  divided,  and  the  machinations  of  rival  mothers  sometimes 
leave  some  of  the  children  vyithout  support.  As  to  polyandry,  the  doubt 
as  to  the  identity  of  the  male  parent  tends  to  relieve  all  males  of  a  definite 
feeling  of  responsibility. 


30  THIS  ECONOMIC  WORLD 

the  same  trough,  are  supplied  by  the  same  commissariat, 
or  are  permitted  to  get  their  living  from  a  common  area 
of  land,  the  problem  is  not  solved.  The  irresponsible  and 
the  responsible  fare  alike.  They  who  feel  a  sense  of  pa- 
rental responsibility  and  limit  their  offspring  are  unable 
to  provide  for  their  offspring  any  better  than  the  offspring 
of  irresponsible  parents  are  provided  for.  The  entire  sub- 
sistence of  the  tribe  is  at  the  mercy,  as  President  Hadley 
has  pointed  out,  of  the  most  reckless  multipliers  and  the 
most  gluttonous  consumers.  But  where  what  was  for- 
merly communal  property  on  a  large  scale  Is  made  com- 
munal property  on  a  small  scale,  that  is,  where  the  land 
instead  of  being  the  communal  property  of  a  large  group 
becomes  the  communal  property  of  that  small  group 
called  the  biological  family,  especially  if  the  family  be 
monogamic,  then  parental  responsibility,  where  It  exists, 
can  be  effective.  The  pair  that  exercises  responsibility 
and  limits  its  offspring  can  give  them  some  of  the  advan- 
tages of  that  forethought.  Without  family  property  this 
would  be  impossible.  Their  offspring  would  fare  no  bet- 
ter than  the  offspring  of  those  pairs  that  felt  no  responsi- 
bility. But  when  the  change  was  made,  and  property  be- 
longed not  to  some  large  communal  group  but  to  the  small 
communal  group  based  on  biological  parenthood,  parental 
responsibility  became  definitely  focused. 

PROTECTION  OF  PROPERTY 

It  Is  not  sufficient  for  responsible  parenthood  that  the 
family  group  shall  have  within  its  control  the  means  of  Its 
own  subsistence.    It  is  also  necessary  that  the  family  have 


"Where  land  and  other  goods,  instead  of  being  the  communal  property 
of  a  large  group  become  the  communal  property  of  that  small  group, 
the   biological   family,    then  parental  responsibility  can  be  effective." 


THE  GREAT  ESCAPE  31 

some  means  of  safeguarding  its  means  of  subsistence. 
Otherwise  the  same  fate  would  overtake  the  family  group 
that  would  overtake  the  tribal  or  national  group  which 
should  fail  to  safeguard  its  territory  and  thus  be  brought 
to  sharing  it  with  the  rapid  breeders  and  lavish  consumers 
of  the  rest  of  the  world.  The  principle  involved  is  the 
same  whether  applied  to  national  territory  or  to  family 
property.  The  right  (real  or  assumed)  of  one  nation  to 
control  its  territory  to  the  exclusion  of  others  and  the 
right  of  one  family  to  control  a  bit  of  land  or  other  prop- 
erty to  the  exclusion  of  others  rest  on  precisely  the  same 
basis  of  economic  necessity.  In  both  cases,  it  is  a  means  of 
safeguarding  subsistence. 

This  will  become  clear  to  anyone  who  will  seriously  con- 
sider the  dilemma  of  a  hunting  tribe  faced  with  the  prob- 
lem of  safeguarding  the  source  of  its  food  supply.  In  a 
given  area,  the  amount  of  game  is  limited.  When  the 
population  of  the  tribe  increases  sufficiently,  game  in  its 
hunting  grounds  must  become  scarce.  If  it  would  avoid 
such  a  high  death  rate  as  to  balance  its  birth  rate,  it  must 
extend  its  hunting  grounds  (in  which  case  it  will  cause  the 
starvation  of  some  other  tribe),  or  it  must  control  its 
birth  rate.  But  even  if  it  does  succeed  in  controlling  its 
birth  rate  and  keeping  its  numbers  within  such  limits  as 
will  avoid  hunger,  this  will  be  futile  unless  it  can  protect 
its  hunting  grounds  against  other  tribes.  If  other  tribes 
do  not  control  their  birth  rates,  they  will,  of  mathematical 
necessity,  need  more  subsistence  than  their  own  hunting 
grounds  can  supply.  Unless  they  are  willing  to  endure 
hunger  and  a  high  death  rate,  they  are  pretty  certain  to 


32  THIS  ECONOMIC  WORLD 

covet  the  abundant  food  to  be  found  in  the  domain  of  the 
tribe  that  has  kept  its  numbers  down.  If  that  tribe  does 
not  defend  its  hunting  grounds,  all  its  rational  efforts  to 
solve  the  poverty  problem  will  be  in  vain. 

Nor  is  the  predicament  less  severe  if,  instead  of  con- 
trolling its  birth  rate,  the  tribe  secures  an  abundance  of 
food  by  increasing  the  productivity  of  its  land  through 
cultivation.  The  fact  that  an  abundance  is  to  be  found 
within  its  borders  is  certain  to  excite  the  covetousness  of 
improvident  tribes  on  the  outside  who  are  in  want.  The 
provident  tribe  must  manage  to  keep  them  out,  or  at  least 
control  the  conditions  of  their  admission.  If  it  does 
neither,  it  will  find  itself  robbed  of  the  advantage  of  its 
own  industry  and  providence. 

Responsible  parenthood  as  a  means  of  extrication  from 
the  ever  pressing  perils  of  want  involves  the  same  neces- 
sity of  self-protection.  Marriage  and  the  biological 
family  unit,  together  with  family  property  that  rewards 
and  encourages  family  forethought,  make  responsible 
parenthood  effective  only  to  the  extent  that  their  beneficial 
results  are  protected  against  the  envious  assaults  of  the 
irresponsible  and  wasteful.  How  to  protect  the  ant 
against  the  grasshopper  is  one  of  the  oldest  problems  in 
history.  But  it  is  quite  as  clearly  necessary  that  the  ant- 
like individual  within  the  nation  shall  be  able  to  protect 
himself  against  being  eaten  out  of  house  and  home  by  im- 
provident consumers  or  irresponsible  breeders  among  his 
neighbors  as  it  is  that  a  nation  which  shows  some  of  the 
qualities  of  the  ant  shall  protect  itself  against  nations 
which  show  the  improvident  qualities  of  the  grasshopper. 


THE  GREAT  ESCAPE  33 

Of  course,  the  habit  of  responsible  parenthood  on  the 
part  of  a  few  cannot  solve  the  problem  of  poverty  for  the 
rest  of  the  world.  Institutions  of  marriage,  which  sup- 
press promiscuity,  and  of  property,  which  free  the  respon- 
sible from  the  necessity  of  sharing  with  the  irresponsible, 
as  well  as  institutions  for  the  protection  of  property,  solve 
the  problem  of  poverty  only  for  those  who  make  use  of 
the  opportunities  created  by  these  institutions.  To  begin 
with,  the  nation  that  adopts  these  institutions  and  whose 
population  conforms  to  them  will  itself  prosper,  but  its 
prosperity  will  do  little  for  nations  that  practice  either 
promiscuity  or  communism,  or  even  for  those  nations 
whose  family  systems  only  partially  enforce  parental  re- 
sponsibility. 

One  runs  the  risk  of  being  accused  of  harboring  an  in- 
herited prejudice  when  he  suggests  that  the  family  con- 
sisting of  a  single  pair  and  their  offspring  creates  a  more 
definite  form  of  parental  responsibility  than  any  other 
form.  Yet  such  a  conclusion  is  forced  upon  anyone  who 
will  analyze  the  problem  carefully.  To  begin  with,  the 
breeding  pair  alone  is  responsible  for  the  existence  of 
children.  If  that  pair  is  also  made,  by  the  legal  institu- 
tions of  the  time  and  place,  definitely  responsible  for  the 
economic  support  of  the  children,  the  two  forms  of  re- 
sponsibility are  definitely  correlated.  To  make  any  larger 
group  responsible  for  the  care  of  children  for  whose  ex- 
istence the  breeding  pair  is  alone  responsible  does  not 
definitely  correlate  the  two  kinds  of  responsibility.  Even 
the  patriarchal  family  fails  in  this  particular.  If,  for  ex- 
ample, some  patriarchal  group  larger  than  the  single  pairs 


34  THIS  ECONOMIC  WORLD 

and  their  offspring  is  forced  by  the  customs  of  the  time  to 
assume  the  responsibility  for  the  care  of  all  who  are  born 
of  the  several  pairs  included  in  the  group,  any  improvi- 
dent pair  may  multiply  at  will  and  rely  upon  the  larger 
group  to  support  its  children.  Even  the  provident  pairs 
cannot  gain  the  full  benefit  of  their  own  providence.  It 
is  believed  by  many  close  students  that  the  family  system 
of  China,  which  in  some  respects  resembles  the  patriarchal 
type,  is  responsible  for  the  terrific  overcrowding  of  that 
country.^ 

Those  tribes  which  practice  promiscuity  can  have  no 
such  thing  as  responsible  parenthood  and,  unless  they 
adopt  contraception,  abortion,  or  infanticide,  can  have  no 
means  of  controlling  the  birth  rate.  The  death  rate  must 
then  rise  to  balance  the  birth  rate  or  this  nation  must  over- 
run the  world.  The  nation  that  practices  communism 
gives  its  provident  no  advantage  over  its  improvident  in- 
dividuals. The  children  of  the  most  reckless  spawner 
share  equally  with  those  of  the  most  careful  family 
builder.  They  to  whom  reproduction  is  a  biological  proc- 
ess fare  equally  well  with  those  to  whom  it  is  a  rational 
and  a  spiritual  process.  Under  such  a  system  there  is  no 
effective  control  of  population  short  of  those  frankly  ac- 

^  Overcrowding  is  a  relative  term.  It  merely  means  the  existence  of 
more  people  than  can  be  comfortably  supported  by  the  industrial  system  of 
the  time  and  place.  In  this  relative  sense,  some  of  the  most  sparsely  popu- 
lated regions  are  the  most  overcrowded.  People  who  try  to  live  by  hunt- 
ing and  fishing  are  likely  to  have  a  hard  time  finding  enough  food  even 
when  there  is  only  one  person  to  the  square  mile.  They  have  not  solved 
the  problem  of  correlating  the  supply  of  food  with  the  demand  for  it. 
Other  people  may  live  comfortably  in  more  densely  populated  areas  be- 
cause they  solve  that  problem  in  a  more  satisfactory  way  by  a  combination 
of  industry  and  parental  responsibility. 


THE  GREAT  ESCAPE  35 

cepted  by  Plato, ^  who  was  too  wise  not  to  see  and  too 
honest  not  to  face  the  facts.  If  there  is  no  effective  con- 
trol of  population,  the  alternative  is  to  spread  over  more 
territory  or  to  allow  the  death  rate  to  rise  to  balance  the 
birth  rate. 

Under  the  two  institutions  of  the  monogamic  family 
and  family  property,  those  small  groups  within  the  nation 
called  families  have  a  chance  to  keep  their  numbers  within 
the  limits  of  a  comfortable  subsistence,  whatever  the  rest 
of  the  world  does.  Under  these  conditions,  a  differentia- 
tion in  the  well-being  of  the  different  families  of  the  na- 
tion became  not  only  possible  but  practically  certain. 
Those  who  met  the  new  conditions  definitely  escaped  from 
poverty.  They  were  then  free  to  turn  their  attention  to 
other  things  than  the  everlasting  quest  for  food.  Others 
of  the  tribe,  it  is  true,  were  still  pursued  by  the  villain 
want.  Only  the  wise,  the  skillful,  and  the  provident  had 
made  their  escape.  The  extrication  of  the  others  remains 
to  be  effected. 

From  the  point  of  view  of  the  whole  tribe  or  nation, 
therefore,  this  extrication  of  the  few  is  a  partial  escape. 
It  is  better  than  nothing,  but  it  leaves  unsolved  the  prob- 
lem of  want  on  the  part  of  many.  The  next  problem  is  to 
extend  this  form  of  economic  salvation  to  everybody.  It 
is  well,  however,  to  bear  in  mind  that  there  is  no  going 
back  in  the  process.  To  give  up  parental  responsibility 
by  any  sort  of  promiscuity  would  not  free  those  who  were 
now  in  want;  it  would  only  reduce  to  the  level  of  want 

*  Cf .  The  Republic  (Jowett's  translation;  New  York  and  London,  1892), 
Book  V,  Sec.  460-461,  pp.  154-155. 


36  THIS  ECONOMIC  WORLD 

those  who  had  been  lifted  above  It.  To  attempt  to  equal- 
ize prosperity  by  turning  from  the  communism  of  the  bio- 
logical family  to  the  communism  of  a  larger  group  would 
likewise  fail.  Merely  to  enable  those  who  multiply  irre- 
sponsibly to  feed  out  of  the  same  trough  or  to  supply 
themselves  out  of  the  same  commissariat  as  those  who 
multiply  responsibly  would,  in  the  end,  throw  the  whole 
population  back  again  into  the  clutches  of  want.  All  at- 
tempts to  supply  the  needs  of  the  irresponsible  out  of  a 
common  fund  must  be  regarded  as  temporary  expedients 
and  not  in  any  way  a  solution  of  the  problem.  This  does 
not  imply  that  temporary  expedients  are  not  necessary. 
They  are,  I  suppose,  in  medicine;  certainly  they  are  In 
sociology.  But  no  one  Is  satisfied  with  a  temporary  expe- 
dient. What  we  want  Is  a  permanent  cure.  That  will  not 
be  found  until  all  are  put  In  the  position  of  those  who  now 
feel  the  requisite  responsibility  and  exercise  due  fore- 
sight and  providence. 

Humanity  is  not  organized  and  cannot  carry  out  any 
universal  social  policy.  Therefore  It  is  not  possible  to  do 
a  great  deal,  outside  the  field  of  education,  for  those  frac- 
tions of  humanity  whose  national  and  tribal  organizations 
fail  to  solve  the  problem  of  poverty  for  them.  National 
and  tribal  organizations  do  not  solve  the  problem  of  pov- 
erty unless  they  stimulate  production  sufliclently  on  the 
one  hand,  and  enforce  parental  responsibility  sufficiently 
on  the  other,  to  preserve  a  favorable  balance  between 
population  and  production.  A  favorable  balance  between 
population  on  the  one  hand  and  production  on  the  other 
is  a  condition  In  which  production  is  able  to  supply  more 


THE  GREAT  ESCAPE  37 

than  the  necessaries  of  life  to  the  existing  population. 
For  the  present,  It  looks  as  If  each  self-determined  frac- 
tion of  humanity  must  be  left  to  work  out  its  own  eco- 
nomic salvation  with  such  help  as  It  can  get  in  the  way  of 
friendly  advice  and  example  from  other  fractions.  Cer- 
tainly we  could  not  force  upon  them  such  institutions  and 
habits  of  life  as  would  automatically  solve  the  problem  of 
poverty  for  them.  In  other  words,  it  looks  as  if,  for  the 
present,  nationalism  is  the  agency,  and  trial  and  error  the 
method,  by  which  the  problem  is  to  be  solved  for  such 
fractions  of  humanity  as  happen  either  by  accident  or 
through  superior  intelligence  to  hit  upon  the  right 
methods.  Those  fractions  of  humanity  which  have 
achieved  a  partial  solution  of  the  problem  must  proceed  to 
a  more  and  more  complete  solution  of  their  own  problem. 
But,  of  course,  the  principles  of  economics  are  universal  in 
their  application.^  No  nation  can  monopolize  them  or  pre- 
vent any  other  nation  from  applying  them  to  the  solution 
of  its  own  problems.  The  civilized  nations  of  today  have 
all  achieved  a  partial  solution  in  that  they  have  adopted  in- 
stitutions and  customs  which  have  enabled  a  part  of  their 
populations  to  lift  themselves  above  want.  They  are  en- 
abled to  keep  themselves  above  want  provided  they  keep 
their  numbers  within  and  their  incomes  outside  such 
limits  as  leave  them  a  surplus  above  the  basic  necessaries 

■■^  This  is  one  of  the  most  banal  of  all  truisms,  but  it  does  not  mean,  as 
some  have  contended  (cf.  Alvin  S.  Johnson  in  the  Neiv  Republic  for 
November  ii,  1925),  that  one  nation  cannot  advance  beyond  others  in 
the  application  of  these  principles.  The  principles  of  chemistry  are  like- 
wise universal,  but  that  has  not  prevented  the  peoples  of  Europe  and 
America  from  making  a  more  eifective  use  of  these  principles  than  the 
peoples  of  Central  Africa  have  yet  done. 


38  THIS  ECONOMIC  WORLD 

of  life.  As  shown  above,  this  is  made  possible  by  the 
combined  institutions  of  the  family  and  family  property. 
As  has  been  pointed  out,  some  forms  of  the  family  and 
some  forms  of  property  work  better  than  others.  Where 
these  two  institutions  are  well  adapted  to  their  fundamen- 
tal purpose,  a  large  fraction  of  the  nation  can  lift  itself 
above  the  level  of  want.  Where  they  are  poorly  adapted 
to  their  purpose,  only  a  small  fraction  of  the  nation 
escapes  want.  Much,  therefore,  remains  to  be  done  to 
adapt  these  two  institutions  to  their  fundamental  purposes. 

Extrication  Number  7 :  Balancing  the 
Economic  Functions 

Our  present  economic  system  has  at  least  prevented 
general  famine  in  those  parts  of  the  world  where  its  devel- 
opment has  advanced  through  the  six  stages  described 
above.  No  such  national  calamity  as  universal  hunger  is 
possible  except  as  a  result  of  some  physical  or  social  cata- 
clysm which  would  amount  to  a  subversion  rather  than  a 
normal  development  of  the  system.  The  worst  that  can 
be  said  against  the  system  is  that  it  has  not  equalized 
prosperity  or  abolished  the  poverty  of  a  submerged  ele- 
ment, larger  or  smaller,  according  as  the  system  is  re- 
tarded or  advanced  in  its  development.  There  remains, 
therefore,  the  need  of  an  extrication  of  this  element. 
This  is  the  problem  of  the  present  and  the  immediate 
future;  it  is  the  problem  which  more  than  justifies  all  the 
energy  and  intelligence  that  can  possibly  be  put  into  the 
study  of  economics. 


THE  GREAT  ESCAPE  39 

The  problem  of  poverty  in  the  present  stage  of  eco- 
nomic development  has  become  a  problem  of  low  wages 
and  unemployment.  Its  solution  must  take  the  form  of 
finding  a  way  of  providing  such  remunerative  employ- 
ment for  all  as  to  provide  everyone  with  a  surplus  well 
above  the  necessaries  of  life.  That  problem  is  by  no 
means  insoluble,  though  most  proposed  solutions  are  fu- 
tile because  they  are  put  forward  by  people  who  have  no 
clear  understanding  of  the  economic  system  or  the  tech- 
nology of  its  control. 

The  minute  division  of  labor,  which  has  become  a  pow- 
erful factor  in  increasing  production  and  advancing  pros- 
perity, itself  creates  a  number  of  problems,  among  which 
is  that  of  occupational  inequality,  or  inequality  of  pros- 
perity among  the  various  specialized  occupations.  Every 
form  of  specialization  creates  the  possibility  of  inequality 
of  reward,  and  social  control  must  be  directed  intelli- 
gently toward  preventing  these  possibilities. 

Specialization  takes  on  many  and  widely  different 
forms,  conspicuous  among  which  are,  first,  different 
groups  of  producers  producing  different  commodities  and 
then  exchanging  surpluses;  second,  different  groups  of  pro- 
ducers performing  specialized  parts  of  the  work  of  pro- 
ducing the  same  commodity.  The  first  of  these  forms  of 
specialization  creates  the  possibility  of  inequality,  but  the 
problem  presents  no  special  theoretical  difliiculties;  that  is, 
it  is  not  difficult  to  see  and  understand  how  and  why  the 
inequality  occurs.  That  being  the  case,  the  remedies  are 
not  difficult  to  prescribe,  though  it  may  be  diflUcult  to  per- 
suade voters  to  adopt  the  prescription. 


40  THIS  ECONOMIC  WORLD 

Let  us  suppose,  for  example,  that  In  a  simple  agricul- 
tural community  some  farmers  specialize  on  the  growing 
of  wheat  and  others  on  the  growing  of  beef.  If  too  large 
a  proportion  happened  to  grow  wheat  and  too  small  a 
proportion  to  grow  beef,  the  desires  of  the  community 
for  the  two  forms  of  food  would  be  very  unequally  satis- 
fied. There  would  be  a  craving  for  more  beef  and  an  in- 
difference toward  bread.  This  would  be  equally  true 
whether  the  community  were  communistic  or  individual- 
istic; the  difference  would  be  in  the  ways  in  which  the  con- 
dition would  express  itself.  If  permitted  to  express  itself 
on  the  market,  that  is,  if  free  buying  and  selling  were  per- 
mitted, it  would  certainly  express  itself  in  the  form  of  a 
high  price  for  beef  and  a  low  price  for  wheat.  In  fact,  it 
would  require  drastic  repression  to  prevent  men  from  try- 
ing to  buy  more  beef  by  offering  large  quantities  of  wheat 
for  small  quantities  of  beef.  So  long  as  the  situation 
lasted,  this  would  mean  unequal  prosperity  for  the  two 
groups  of  specialists;  the  beef  growers  would  be  relatively 
rich  and  the  wheat  growers  relatively  poor.  In  a  strictly 
communistic  society,  where  buying  and  selling  was  sup- 
pressed, the  basic  fact  would  have  to  find  some  other  way 
of  expressing  itself. 

In  a  society  where  free  buying  and  selling  Is  permitted, 
the  situation  would  tend  to  cure  itself  automatically;  that 
is,  the  low  price  for  wheat  would  normally  discourage 
wheat  growing  and  the  high  price  for  beef  would  en- 
courage beef  growing,  and  these  facts  would,  in  the  ab- 
sence of  hindrances,  reduce  the  number  of  wheat  growers 
and  increase  the  number  of  beef  growers  until  a  balance 


THE  GREAT  ESCAPE  41 

was  restored  under  which  the  prosperity  of  the  two  groups 
of  specialists  would  be,  all  things  considered,  approxi- 
mately equal.  If  it  is  found  that  there  are  hindrances  in 
the  way  of  such  a  readjustment,  such  as  a  monopolistic 
control  of  beef  growing,  the  remedy  would  seem  to  lie  in 
the  direction  of  removing  those  hindrances  in  order  that 
the  readjustment  might  take  place  rather  than  in  the  sup- 
pression of  all  buying  and  selling,  or  the  decreeing  of 
equal  prosperity  for  both  groups  without  first  redistribut- 
ing the  workers  among  the  two  occupations.  The  tech- 
nology of  economic  reform  consists  in  knowing  how  to 
find  such  hindrances  and  how  to  remove  them  In  order 
that  economic  forces  may  effect  the  cure. 

It  might  be  found,  for  example,  that  the  monopolistic 
control  of  beef  growing  was  due,  not  to  the  machinations 
of  beef  growers,  but  to  the  simple  fact  that  beef  growing 
required  a  special  kind  of  skill  or  knowledge  which  boys 
who  grew  up  on  wheat  farms  had  no  means  of  acquiring. 
In  that  case,  instead  of  railing  at  beef  growers,  calling 
them  plutocrats  and  other  hard  names,  which  would  only 
make  them  unpopular  and  discourage  others  from  trying 
to  become  beef  growers,  thus  making  a  bad  situation  still 
worse,  beef  growers  should  be  commended.  The  remedy 
is  twofold.  First,  beef  growing  should  be  rewarded 
partly  with  esteem.  That  alone  would  encourage  more 
men  to  try  to  become  beef  growers,  and  that  would 
tend  to  keep  the  price  of  beef  down.  In  other  words, 
beef  growers  would  be  rewarded  partly  with  esteem  and 
partly  with  money.  If  esteem  is  withheld,  more  money 
will  have  to  be  paid.     Second,  schools  should  make  it 


42  THIS  ECONOMIC  WORLD 

easy  for  boys  who  grow  up  on  wheat  farms  to  learn  the 
science  or  the  art  of  beef  growing.  Thus  the  monopolistic 
control  of  beef  growing  would  be  broken,  and  prosperity 
would  tend  to  equalize  itself  between  the  two  occupations 
of  wheat  growing  and  beef  growing.  By  the  same  general 
method,  prosperity  can  be  equalized,  completely  or  ap- 
proximately, among  all  occupations.^ 

The  other  forrh  of  division  of  labor,  under  which  differ- 
ent groups  of  workers  perform  different  parts  of  the  work 
of  producing  the  same  commodity,  presents  a  more  com- 
plicated problem,  but  a  careful  analysis  will  show  that  the 
same  principles  are  involved  and  the  same  remedies  sug- 
gested. This  form  of  division  of  labor  again  divides  it- 
self into  two  special  kinds.  First,  different  groups  of 
workers  will  be  found  working  on  the  same  piece  of  ma- 
terial at  different  times,  bringing  it  through  successive 
stages  as  it  approaches  completion.  Second,  different 
groups  will  be  found  working  contemporaneously  either 
on  the  same  materials  or  on  different  pieces  of  material 
that  are  later  to  be  assembled  in  a  completed  article. ^ 

An  example  of  the  first  is  found  in  the  case  of  farmers, 
millers,  and  bakers,  to  say  nothing  of  carriers  and  various 
others  who  participate  in  the  production  of  bread.  If 
there  should  be  a  lack  of  balance  between  the  three  occu- 
pations, or  between  any  two  of  them,  there  will  be  an 
inequality  of  prosperity.    If,  for  example,  there  should  be 

*As  to  just  what  is  meant  by  equality  among  occupations,  see  Chapter 
VI,  on  Equality. 

-  See  Professor  Taussig's  distinction  between  contemporaneous  and  suc- 
cessive division  of  labor,  in  Images  and  Capital  (New  York,  D.  Appleton 
and  Company,  1S99),  p.  6. 


THE  GREAT  ESCAPE  43 

a  relative  scarcity  of  millers,  or  a  relative  superfluity  of 
farmers,  millers  would  get  a  relatively  large  and  farmers 
a  relatively  small  proportion  of  the  total  price  of  flour. 
The  remedy  is  the  same  as  the  one  suggested  in  the  case 
of  wheat  growers  and  beef  growers.  It  is  to  remove  what- 
ever hindrances  are  found  to  be  preventing  the  free  flow 
of  labor  and  enterprise  into  the  two  occupations.  In 
most  of  these  cases,  the  greatest  hindrance  is  Ignorance, 
the  removal  of  which  calls  for  education. 

An  example  of  the  second,  or  contemporaneous,  kind  of 
divison  of  labor  is  found  inside  the  flour  mill  or  the  bak- 
ery, or  any  other  large  establishment  where  different 
groups  are  doing  special  kinds  of  work  in  the  production 
of  the  same  product.  The  possibility  of  a  lack  of  balance 
exists  here  as  well  as  in  the  other  cases,  the  same  results 
follow  from  such  a  lack  of  balance,  and  the  same  reme- 
dies suggest  themselves.  If  there  should  be  more  weavers 
in  a  textile  industry  than  are  needed  to  spin  the 
limited  amount  of  yarn  which  the  limited  number  of  spin- 
ners could  supply,  there  is  a  greater  need  for  more  spin- 
ners than  for  more  weavers.  Under  free  bargaining,  the 
greater  need  for  spinners  will  express  itself  in  the  form 
of  higher  wages,  and  the  lesser  need  for  weavers  in  the 
form  of  lower  wages.  Unless  there  is  some  hindrance, 
this  difference  of  wages  would  speedily  correct  itself  by 
inducing  more  to  become  spinners  and  fewer  to  become 
weavers.  If  there  Is  some  hindrance  to  such  occupational 
redistribution,  the  obvious  thing  to  do  Is  to  remove  that 
hindrance.  If  that  can  be  done,  the  situation  will  correct 
itself. 


44  THIS  ECONOMIC  WORLD 

Most  differences  in  the  prosperity  of  different  occupa- 
tions will  be  found  to  be  a  result  of  some  hindrance  to  the 
occupational  redistribution  of  the  working  population.  A 
positive  program  of  social  betterment  must  therefore  con- 
sist largely  In  the  removal  of  these  hindrances.  The 
technology  of  economic  reform  consists  of  skill  in  detect- 
ing these  hindrances  and  of  carrying  out  programs  for 
their  removal.  Cases  of  monopoly  and  partial  monopoly 
are  among  the  various  hindrances,  but  a  general  program 
for  the  elimination  of  monopoly  by  no  means  exhausts  the 
possibility  of  immobility  of  labor. 

One  key  to  all  programs  of  permanent  economic  im- 
provement is  the  understanding  of  the  concept  of  a  static 
condition  of  the  market,  or  a  condition  of  equilibrium  of 
supply  and  demand.  A  static  condition  Is  an  equilibrium 
of  forces.  By  disturbing  that  equilibrium  Intelligently 
the  forces  at  work  can  be  made  to  produce  automatically, 
so  far  as  further  effort  is  concerned,  the  results  desired. 
This  is  the  method  of  the  engineer,  of  the  diplomat,  and 
of  everyone  else  who  produces  large  practical  results  with 
a  minimum  of  effort. 

One  example  of  a  static  condition  is  the  biologist's  con- 
cept of  a  balance  of  nature.  The  biologist  who  once  un- 
derstands the  factors  that  enter  into  a  given  balance  can 
then  so  play  upon  the  forces  at  work  as  to  produce  with 
comparatively  slight  effort  results  that  would  require 
armies  to  accomplish  by  main  force  and  direct  methods. 
Insect  pests,  such  as  the  chinch  bug  and  the  gypsy  moth, 
can  be  effectively  controlled  in  this  way.  In  the  sugar 
plantations,    rats   have   sometimes   been   effectively   con- 


THE  GREAT  ESCAPE  45 

trolled  by  the  simple  device  of  introducing  the  Egyptian 
mongoose.  A  wholesale  rat  killing  campaign  by  main 
force  would  have  cost  infinitely  more  and  probably  have 
produced  less  satisfactory  results.  A  drainage  engineer 
can  show  how,  by  the  digging  of  a  few  ditches,  the  drain- 
age system  of  a  continent  may  be  changed  and  billions  of 
tons  of  water  transferred  from  one  ocean  to  another  with- 
out further  effort — that  is  to  say,  automatically.  Simi- 
larly, a  shrewd  diplomat,  by  knowing  how  to  play  upon 
the  balance  of  power,  may  change  the  course  of  human 
history  with  a  moderate  amount  of  effort. 

The  concept  of  an  equilibrium  price  on  the  market 
furnishes  the  economist  with  a  key  to  reform  comparable 
to  that  which  the  balance  of  power  furnishes  the  diplo- 
mat, or  the  balance  of  nature  the  biologist.  An  equilib- 
rium price  is  a  price  which  will  induce  producers  to  supply 
as  much  of  a  commodity  in  question  as  buyers  are  willing 
to  buy.  At  the  equilibrium  price  the  market  clears  itself; 
exactly  as  much  is  offered  for  sale  as  is  bought,  leaving 
neither  would-be  buyers  ready  to  pay  the  price  but  unable 
to  get  the  commodity,  nor  would-be  sellers  willing  to  sell 
for  the  price  but  unable  to  find  buyers. 

Every  price  for  whatever  commodity  tends  to  become  an 
equilibrium  price,  and  in  the  absence  of  disturbance  actu- 
ally becomes  an  equilibrium  price.  Even  when  disturbed, 
it  tends  to  reassert  itself.  An  economist  who  understands 
the  factors  and  forces  that  operate  to  maintain  this 
equilibrium  is  then  In  a  position  to  play  upon  it  in  such  3 
way  as  to  produce  vast  and  permanent  results  with  rela- 
tively little  effort.    Any  other  method  than  this  is  likely  to 


46  THIS  ECONOMIC  WORLD 

prove  as  ineffective  as  an  attempt  to  eradicate  the  fly  or 
the  mosquito  by  merely  swatting.  A  little  effort  expended 
in  the  direction  of  destroying  the  breeding  places  of  the 
fly  or  the  mosquito  is  much  more  effective.  A  little  effort 
put  forth  in  the  direction  of  changing  the  equilibrium  of 
forces  that  produce  a  given  price  is  likewise  more  effective 
than  any  direct  price  fixing  legislation  by  the  government. 

If,  for  example,  by  some  government  decree  or  trade- 
union  rule  the  price  of  a  given  commodity — say  a  given 
kind  of  labor — is  forced  above  the  equilibrium  level,  that 
is,  above  the  level  which  will  induce  just  as  many  men  to 
seek  employment  in  the  occupation  in  question  as  em- 
ployers are  willing  to  hire,  the  equilibrium  is,  of  course, 
disturbed.  But  it  tends  to  reassert  itself,  first,  by  reducing 
the  number  of  men  whom  employers  are  willing  or  able  to 
hire,  and  at  the  same  time  by  increasing  the  number  of 
laborers  who  will  seek  employment  in  that  occupation. 
One  of  the  first  results  of  this  disturbed  equilibrium  is  un- 
employment— more  laborers  seeking  employment  in  this 
occupation  than  employers  are  willing  or  able  to  hire. 
This  mass  of  unemployed  laborers,  in  turn,  will  create  a 
long  train  of  consequences  which  will  require  increasingly 
severe  legislative  measures  or  trade-union  activities  to  con- 
trol. Rather  than  remain  unemployed,  some  of  the 
laborers  will  be  Induced  to  offer  to  work  for  less  than  the 
artificially  established  wage.  If  they  are  permitted  to  do 
so,  they  will  break  the  artificial  wage  scale.  If  prevented, 
still  worse  consequences  are  likely  to  follow. 

Instead  of  trying  to  raise  wages  directly  and  creating 
this  long  train  of  consequences,  there  would  at  least  be 


THE  GREAT  ESCAPE  47 

considerable  economy  of  effort  if  we  were  to  turn  our  at- 
tention to  the  general  factors  that  determine  the  equilib- 
rium wage  in  order  to  see  if  we  cannot  change  some  of 
these  factors  and  create  a  new  equilibrium  that  will  give 
a  higher  wage.  If  this  can  be  done,  then  without  further 
effort,  wages  will  rise  automatically.  When  a  new  equi- 
librium wage  at  a  higher  level  is  established,  it  persists 
and  does  not  bring  with  it  such  a  train  of  evil  consequences 
as  invariably  follow  the  attempt  to  decree  wages  directly. 

In  order  to  deal  effectively  with  any  economic  problem 
it  is,  of  course,  necessary  to  understand  the  factors  and 
forces  that  are  in  the  balance.  To  be  somewhat  more 
specific,  it  is  necessary  to  know  what  factors  are  at  work 
inducing  laborers  to  offer  themselves  for  hire  in  a  given 
occupation  in  order  that  we  may  understand  how  to 
change  the  equilibrium  in  such  a  way  as  to  produce  a 
higher  equilibrium  wage.  When  we  once  understand  this 
problem,  we  may  find  some  way  of  reducing  the  number 
of  laborers  who  will  offer  themselves  for  hire  at  the  low 
wage  or  of  increasing  the  number  which  employers  will 
be  willing  to  hire  at  that  or  some  higher  wage.  In  either 
way,  the  equilibrium  would  be  changed,  and  a  higher  wage 
would  be  necessary  to  bring  about  a  balance  between  those 
seeking  employment  and  the  number  wanted  by  em- 
ployers. 

If,  for  example,  It  Is  found  that  one  factor  In  the  equi- 
librium of  the  demand  for  and  the  supply  of  labor  of  a 
given  kind  Is  free  Immigration  from  low-wage  countries, 
the  remedy  Is  easy.  If  we  find  that  a  very  low  wage  Is  suf- 
ficient to  Induce  as  many  laborers  to  come  from  these  low- 


48  THIS  ECONOMIC  WORLD 

wage  countries  as  employers  are  willing  to  hire  at  this  low 
wage,  the  restriction  of  immigration  from  those  countries 
would  change  the  equilibrium  and  automatically  bring 
about  a  higher  wage  level.  Moreover,  the  new  equilib- 
rium wage  would  establish  itself  without  further  effort 
after  restriction  becomes  effective.  It  will  then  require  a 
higher  wage  to  induce  as  many  laborers  to  offer  them- 
selves as  employers  are  willing  to  hire.  Most  members 
of  the  employing  class  seem  to  be  more  familiar  with  the 
laws  of  the  market  than  are  manual  laborers;  they  are 
therefore  in  a  somewhat  better  position  to  deal  with  this 
problem  of  an  equilibrium  wage  than  are  their  employees. 
Some  of  them,  at  least,  show  a  perfectly  clear  understand- 
ing of  the  line  of  procedure.  For  example,  the  late  Frank 
A.  Munsey  who,  like  many  of  his  class,  seemed  to  know 
exactly  what  he  wanted  and  how  to  get  it,  made  the  fol- 
lowing suggestion  before  the  American  Bankers  Associa- 
tion in  1922 : 

The  law  passed  by  Congress  soon  after  the  war  restricting  immi- 
gration is  wholly  responsible  for  the  present  labor  shortage.  If 
this  law  had  never  gone  on  the  statute  books,  if  our  portals  had 
remained  as  free  to  immigration  since  the  war  as  they  were  before 
the  war  and  as  they  have  been  throughout  our  history,  our  inflated 
wage  scale  would  have  been  well  liquidated  before  now. 

This  furnishes  an  excellent  example  of  the  superior 
efficiency  of  the  method  of  controlling  price  by  playing 
with  the  economic  equilibrium  over  the  method  of  direct 
manipulation  of  price.  It  would  have  taken  Mr.  Mun- 
sey's  class  a  long  time  and  much  hard  fighting  to  beat 
wages  down  by  any  other  method.     If,  however,  they 


THE  GREAT  ESCAPE  49 

could  get  the  restriction  of  immigration  removed,  wages 
would  fall  automatically  without  further  trouble  on  their 
part.  However,  if  wages  can  be  forced  down  by  this 
simple  device,  they  can  also,  if  other  factors  remain  the 
same,  be  maintained  at  the  same  level  or  forced  even 
higher  by  an  equally  simple  process,  that  is,  by  still  fur- 
ther restricting  immigration  or  by  putting  the  American 
continent  as  well  as  Europe  on  the  quota  basis. 

Again,  it  may  be  found  that  one  factor  in  the  equilib- 
rium is  a  low  standard  of  living  on  the  part  of  native 
laborers.  If  they  have  a  low  standard,  they  will  multiply 
and  keep  the  labor  market  well  supplied  even  though  they 
are  getting  low  wages.  If  the  standard  of  living  can  be 
raised,  they  will  not  multiply  and  offer  themselves  at  such 
low  wages.  The  resulting  scarcity  of  labor  will,  within  a 
generation  at  least,  result  in  a  higher  equilibrium  wage. 
That  is  to  say,  where  laborers  have  a  very  high  standard 
of  living,  one  generation  after  another,  it  will  take  a  very 
high  wage  to  induce  as  many  laborers  to  offer  themselves 
for  hire  as  employers  are  willing  to  hire. 

It  is  almost  a  truism  to  say  that  if  no  one  would  marry 
and  undertake  the  support  of  a  family  until  he  could  have 
a  savings  deposit,  a  life  insurance  policy,  a  home,  or  a 
Ford  car,  then  no  children  would  be  legitimately  born 
except  in  homes  where  these  things  existed.  That  would, 
in  a  generation  or  two,  so  thin  out  laborers  as  to  establish 
such  wages  as  would  enable  all  these  things  to  be  provided 
for  every  family.  In  other  words,  it  would  eliminate  low 
wages  and  poverty. 

At  this  point,  perhaps,  we  should  stop  to  consider  a 


50  THIS  ECONOMIC  WORLD 

very  large  and  general  question  that  has  been  something 
of  an  economic  puzzle.  Why  do  not  men  avoid  every 
poorly  paid  occupation  and  enter  those  that  are  well  paid, 
so  long  as  there  are  any  differences?  It  is  obvious  that  if 
they  did,  all  differences  of  prosperity  as  between  or  among 
occupations  would  tend  to  disappear.  The  moment  any 
occupation  became  a  little  more  remunerative  than  any 
other,  the  oncoming  stream  of  youth  looking  for  careers 
would  pour  into  the  more  remunerative  occupation  until 
the  sum  total  of  satisfactions,  pecuniary  and  non-pecuni- 
ary, in  that  occupation  were  no  higher  than  in  any  other. 
Or,  conversely,  if  any  occupation  showed  signs  of  becom- 
ing less  remunerative  or  less  satisfying  than  others,  the 
oncoming  stream  of  youth  would  be  diverted  from  that 
occupation  until  the  scarcity  of  workers  would  raise  the 
sum  total  of  satisfactions  in  that  occupation  to  the  level 
of  the  others.  Why  does  not  labor  flow  thus  freely?  If 
the  answer  to  this  question  can  be  found,  it  may  then  be 
possible  to  solve  most  of  our  problems  of  inequality. 

We  may  state  the  general  proposition  that  hindrances 
to  the  free  flow  of  labor  from  one  occupation  to  another 
are  responsible,  but  this  is  only  to  name  the  problem. 
What  are  the  hindrances?  If  they  can  be  discovered  and 
removed,  then  the  free  flow  of  labor  from  one  occupation 
to  another  will  automatically  cure  most  forms  of  inequal- 
ity. If  they  cannot  be  removed,  then  some  other  method 
of  cure  must  Jbe  found.  As  suggested  in  a  previous  para- 
graph, monopolistic  control  of  one  occupation  may  be 
such  a  hindrance.  If  that  is  found  to  be  the  case  and  if 
that   monopolistic   control   can   be   destroyed,   then   the 


THE  GREAT  ESCAPE  51 

inequality  that  grew  out  of  that  monopolistic  control  auto- 
matically cures  itself.  In  another  case,  ignorance  may  be 
found  to  be  a  hindrance — for  instance,  one  highly  re- 
munerative occupation  may  require  a  kind  of  skill  which 
few  possess  or  have  the  opportunity  to  acquire.  If  such  is 
found  to  be  the  case  and  if  an  educational  system  can  be 
devised  which  will  dissipate  that  ignorance  or  destroy  the 
monopoly  of  knowledge,  again,  as  in  the  case  of  the  re- 
moval of  other  monopolies,  the  removal  of  this  monopoly 
will  result  in  an  automatic  cure  of  the  Inequality. 

In  short,  the  technology  of  reform  consists  largely  in 
discovering  hindrances  to  the  free  flow  of  human  energy 
Into  the  different  economic  channels  through  which  human 
energy  can  be  applied  to  Industry.  Far  from  being  a 
laissez  faire  policy,  this  requires  positive  action  on  the 
part  of  the  state  or  positive  social  control  of  one  kind  or 
another.  Unlike  many  schemes  of  social  reform,  how- 
ever, it  Is  satisfied  with  the  removal  of  hindrances  and 
then  relies  upon  economic  forces  after  the  hindrances  are 
removed  to  effect  an  automatic  cure  of  the  Inequalities 
that  previously  existed.  In  this  respect  only  does  this 
policy  resemble  what  used  to  be  called  laissez  faire. 

Experience  has  brought  clearly  to  light  certain  hin- 
drances to  the  movement  of  labor  from  poorly  paid  to  re- 
munerative activities.  Among  them  we  find  (i)  lack  of 
educational  opportunities;  (2)  lack  of  dependability,  due 
to  drunkenness  or  other  Intemperance;  (3)  lack  of  mana- 
gerial capacity,  due  to  either  a  wrong  intellectual  attitude 
towards  business  or  premature  retirement  from  manage- 
ment; (4)  scarcity  of  capital.    We  shall  now  examine  the 


52  THIS  ECONOMIC  WORLD 

four  hindrances  here  mentioned.  To  these  may  be  added 
two  which  have  already  been  discussed — the  free  immigra- 
tion of  foreign  labor,  and  indifference  to  the  family  stand- 
ard of  living. 

If  it  has  been  found  that  one  cause  of  low  equilibrium 
wages  in  certain  occupations  is  the  lack  of  educational  op- 
portunities, the  remedy  may  be  applied  at  the  source  by 
providing  such  opportunities.  After  that  is  done,  we  may 
safely  rely  upon  economic  forces  to  bring  about  a  cure. 
No  one  will  then  be  forced  into  an  unremunerative  occu- 
pation. He  will  be  able  to  choose  between  those  that  are 
remunerative  and  those  that  are  unremunerative,  and  a 
large  enough  number  may  be  relied  upon  to  make  an  in- 
telligent choice  to  bring  about  a  change  in  the  balance. 

It  must  be  confessed,  however,  in  this  connection  that 
certain  economic  optimists  have,  in  the  past,  placed  too 
much  dependence  upon  an  assumed  natural  mobility  of 
labor.  In  the  absence  of  first-class  educational  oppor- 
tunities there  is  no  such  natural  mobility.  Children  who 
grow  up  in  families  that  were  too  poor  to  pay  the  cost  of 
education  are  practically  doomed  to  follow  some  occupa- 
tion for  which  no  education  is  necessary.  The  poverty  ex- 
isting in  such  occupations  does  not  cure  itself  but  tends  to 
become  accentuated.  There  are  only  two  possible  ways  of 
curing  it.  One  is  to  tax  other  and  more  remunerative  oc- 
cupations by  giving  those  who  carry  on  these  occupations 
less  than  they  are  worth  in  order  that  those  who  are 
crowded  into  the  unremunerative  occupations  may  be  paid 
more  than  they  are  worth.  This  may  be  disguised  under 
various  names,  such  as  socialism  or  communism,  but  no 


THE  GREAT  ESCAPE  53 

name  can  disguise  the  fact  that  some  are  being  supported 
in  part  out  of  the  products  of  others — which  is  charity  and 
not  justice,  unless  the  two  terms  be  identified  or  confused. 

A  system  of  free  and  universal  education,  especially  if 
it  is  directed  toward  practical  ends  by  educational  states- 
men who  understand  the  principle  of  occupational  balance, 
will  greatly  increase  the  mobility  of  labor.  It  will  give 
every  young  person  a  wider  choice  of  occupations.  It  will 
enable  them,  in  considerable  numbers  at  least,  to  qualify 
for  the  occupations  that  are  well  paid  and  to  avoid  those 
that  are  poorly  paid.  This  will  in  itself  tend  to  equalize 
wages  or  rewards. 

It  is  not  necessary,  of  course,  to  pretend  that  the  field 
of  choice  is  unlimited.  An  unlimited  choice  is  not  neces- 
sary to  cure  the  difficulty.  If  a  small  percentage  should 
change  from  the  unskilled  and  poorly  paid  to  the  skilled 
and  well  paid  occupations,  it  would  make  considerable  dif- 
ference in  the  relative  remuneration  of  the  two  classes  of 
occupations.  Such  an  improvement  in  the  educational  sys- 
tem would  raise  the  equilibrium  wage  in  the  occupations 
that  were  previously  poorly  paid.  In  short,  it  would  take 
a  higher  wage  to  induce  as  many  workers  to  offer  them- 
selves for  hire  as  employers  were  willing  to  hire. 

Even  a  moderately  efficient  educational  system  would 
produce  profound  changes  of  this  kind;  that  is,  it  would 
thin  out  the  numbers  that  would  otherwise  be  compelled 
to  follow  the  lowest  grade  of  occupations  and  increase  the 
number  that  would  be  fitted  for  the  higher  grade  occupa- 
tions. This  might  be  illustrated  by  the  following  hypo- 
thetical table : 


54  THIS  ECONOMIC  WORLD 

Distribution  of  Workino  Population  among 
Industrial  Groups 

Assumed  Resulting 

Distribution    of  Distribution  of 

Occupational  Workers  in  a  Country  Woricers  in  a  Country 

Groups  without  Popular  with  Popular 

Education  Education 

(per  cent)  (per  cent) 

A                                           4  8 

B                                            8  13 

C                                       i6  34 

D                                       33  36 

£                                          40  30 

100  100 

Even  though  hypothetical,  these  figures  are  sufficient  to 
illustrate  the  principle.  In  this  table  we  shall  grade  the 
occupations  into  five  groups  according  to  the  degree  of 
mentality  required  in  each.^  In  Group  A  we  shall  include 
the  highest  grade  of  occupations,  that  is,  those  in  which 
properly  qualified  men  are  scarce  and  highly  paid.  In 
Group  E  we  shall  include  the  lowest — those  in  which 
properly  qualified  men  are  most  abundant  and  most  poorly 
paid.  The  other  groups  are  arranged  between  these  two 
extremes.  Let  us  assume  that,  in  the  absence  of  a  system 
of  popular  education,  only  4%  of  the  working  population 
would  be  fitted  for  the  occupations  in  Group  A,  8%  in 
Group  B,  16%  in  Group  C,  32%  in  Group  D,  and  40% 
in  Group  E.  This  inequality  in  the  occupational  distri- 
bution of  the  population  would  normally  produce  a  wide 
inequality  in  the  incomes  of  the  different  groups.  Those 
in  Group  A  would  normally  receive  inordinately  large 

iSee  Carver  and  Hall,  Human  Relations   (D.  C.  Heath  k  Company, 
1933),  p.  329. 


THE  GREAT  ESCAPE  55 

incomes,  those  in  Group  E  distressingly  small  incomes.  In 
fact,  it  is  found  that  the  occupational  inequality  is  always 
high  in  those  countries  where  the  educational  system  is  not 
highly  developed.^ 

But  if  in  the  same  country  or  In  one  with  a  similar  dis- 
tribution of  natural  talent  a  highly  efficient  educational 
system  were  introduced  as  a  factor  in  changing  the  bal- 
ance, results  similar  in  principle  to  those  illustrated  in  the 
third  column  might  be  expected  to  follow.  If  the  better 
50%  of  those  who,  without  education,  would  be  compelled 
to  follow  the  occupations  in  Group  E  could  be  trained  suffi- 
ciently to  enable  them  to  enter  Group  D,  this  would  leave 
only  20%  of  the  total  population  in  the  condition  of  be- 
ing compelled  to  follow  some  occupation  in  Group  E. 
Again,  if  half  of  those  who,  without  education,  would  be 
fitted  only  for  occupations  of  the  D  group,  were  under 
the  educational  system  promoted  to  the  C  group,  and  if 
half  of  those  who,  without  education,  would  follow  the 
occupations  of  the  C  group  move  on  to  the  B  group,  and 
so  on  to  the  top,  we  should  then  find  the  possible  occupa- 
tional distribution  represented  by  the  third  column.  This 
shift  in  the  occupational  distribution  of  the  population 
would  disturb  the  equilibrium  wages  of  all  occupations 
and  would  tend  to  raise  the  wages  of  the  lower  grades, 
especially  the  very  lowest,  and  to  reduce  the  incomes  of  the 
upper  grades,  especially  the  very  highest.  In  short,  It 
would  flatten  out  the  curve  of  Inequality. 

Again,  It  may  be  found  that  one  hindrance  to  the  mo- 

^  See  an  article  by  S.  N.  Procopovitch  on  "The  Distribution  of  National 
Income,"  Economic  Journal,  March,  1926. 


56  THIS  ECONOMIC  WORLD 

bllity  of  labor  is  drunkenness.  In  this  interlocking  civili- 
zation with  its  multiplicity  of  interdependent  parts,  de- 
pendability is  one  of  the  most  valuable  of  all  economic 
qualities.  Nothing  so  unfits  a  man  for  the  higher  eco- 
nomic positions  as  undependability.  Next  to  lying,  steal- 
ing, and  killing,  drunkenness  is  the  most  destructive  of  all 
vices  because  It  strikes  directly  at  a  man's  dependability. 
Widespread  drunkenness  merely  means,  therefore,  not 
only  that  large  numbers  who  might  otherwise  be  promoted 
to  the  higher  positions  cannot  be  promoted,  but  also  that 
many  who  might  have  continued  to  hold  higher  positions 
must  be  demoted.  This  would  tend  inevitably  toward  the 
congestion  of  the  lower  occupations,  where  men  can  be 
watched  and  supervised  and  where  dependability,  there- 
fore, is  not  of  such  vital  importance.  If  drunkenness 
should  be  found  to  be  one  of  the  hindrances  to  the  mobility 
of  labor,  a  rational  remedy  would  be  to  eliminate  drunken- 
ness rather  than  to  try  to  force  wages  to  an  artificial  level 
in  those  occupations  that  were  congested  because  of  the 
fact  that  large  numbers  of  men  could  not  qualify  for  any- 
thing better. 

The  equilibrium  wage  is  not  wholly  a  matter  of  the 
supply  of  labor.  It  is  partly  a  matter  of  demand.  Even 
with  a  small  number  of  laborers  in  the  country,  there 
might  be  a  low  equilibrium  wage  if  there  is  very  little  de- 
mand for  labor.  The  lack  of  demand  might  create  a  situ- 
ation In  which  as  many  laborers  would  oi^er  themselves 
at  a  dollar  a  day  as  would  or  could  be  hired  by  a  limited 
number  of  employers  of  low  business  capacity.  A  larger 
number  of  employers  of  higher  capacity  would  be  able  to 


THE  GREAT  ESCAPE  57 

pay  higher  wages,  and  the  competition  would  probably 
compel  them  to  do  so  because  it  would  compel  them  to  es- 
tablish a  higher  equilibrium  wage.  It  might  very  well  re- 
quire a  five-dollar  wage  under  these  conditions  to  induce 
as  many  workers  to  offer  themselves  as  employers  were 
willing  to  hire.  This  will  indicate  that  it  is  quite  impor- 
tant that  we  analyze  the  factors  that  determine  the  de- 
mand for  labor  as  well  as  those  that  determine  its  supply. 
If  we  find  in  a  given  country  that  managerial  capacity, 
even  of  a  mediocre  sort,  is  very  highly  remunerative, 
while  manual  labor  receives  very  low  wages,  the  old  ques- 
tion occurs,  why  do  not  more  people  become  managers 
and  fewer  become  laborers?  Unless  we  are  willing  to 
fall  back  on  fatalism  or  Divine  Providence  and  say  that 
only  so  many  men  are  fated  to  become  managers  and  that 
the  great  mass  are  fated  to  become  workers,  we  must  try 
to  find  some  reason  for  this  bad  distribution  of  human 
talent  as  between  managerial  and  manual  occupations. 
What  are  the  hindrances  which  prevent  men  from  becom- 
ing business  managers,  enterprisers,  and  the  like?  One 
hindrance  may  be  that  the  colleges  and  universities  of  the 
country  have  taken  a  supercilious  attitude  toward  busi- 
ness and  have  devoted  all  their  time  and  energy  toward 
the  problem  of  diverting  much  of  the  talent  of  the  coun- 
try from  business  into  the  ornamental  professions.  Where 
that  is  the  case,  the  universities  are  partly  responsible  for 
low  wages  and  widespread  poverty  on  the  part  of  the 
workers.  If,  after  having  succeeded  in  preventing  the 
best  talent  of  the  country  from  going  into  business,  leaving 
industries  to  be  run  by  second-rate  and  third-rate  men,  the 


58  THIS  ECONOMIC  WORLD 

universities  and  their  spokesmen  should  content  them- 
selves with  berating  those  second-  and  third-rate  men  for 
not  paying  higher  wages,  the  universities  and  their  spokes- 
men would  be  acting  very  stupidly.  They  would  be  no 
more  entitled  to  respect  than  would  the  universities  of  a 
country  be  if  they  used  all  their  power  and  influence  to 
keep  the  best  men  from  going  into  medicine,  with  the 
result  that  only  second-  and  third-rate  men  went  into  medi- 
cine, and  then  content  themselves  with  merely  scolding 
these  men  for  not  doing  more  to  improve  the  public  health 
and  lower  the  death  rate. 

A  prejudice  against  business,  v/hether  led  by  the  uni- 
versities or  created  in  some  other  way,  acts  as  a  hindrance 
to  the  free  flow  of  human  talent  from  one  occupation  to 
another  and  may  be  a  powerful  factor  in  preserving  in- 
equality of  prosperity  among  occupations.  To  try  to 
force  a  small  number  of  managers  and  enterprisers  of  low 
capacity  to  pay  higher  wages  than  their  low  capacity  will 
enable  them  to  pay  Is  merely  to  force  some  of  them  Into 
bankruptcy  and  throw  considerable  numbers  of  laborers 
out  of  employment,  creating  an  industrial  reserve  army 
and  thus  making  a  bad  matter  very  much  worse. 

General  observation  reveals  the  fact  that  every  country 
in  which  business  is  held  in  lower  esteem  than  the  military 
profession,  law,  medicine,  and  theology;  in  which  universi- 
ties uniformly  try  to  train  men  for  anything  except  busi- 
ness, always  has  a  scarcity  of  active  business  talent  and 
has  low-grade  Industries  paying  low  wages.  On  the  other 
hand,  any  country  in  which  business  Is  held  In  as  high  re- 
spect as  any  of  the  professions,  and  in  which  the  unlversi- 


THE  GREAT  ESCAPE  59 

ties  frankly  accept  this  and  train  a  fair  share  of  the  best 
talent  of  the  country  for  industrial  careers,  has  first-class 
industries  paying  relatively  high  wages.  This  suggests 
the  obvious  remedy,  though  the  problem  of  applying  the 
remedy  is  not  easy.  How  can  the  prejudice  against  indus- 
trial careers  be  removed?  If  the  colleges  and  universities 
do  not  take  the  lead  in  the  matter,  it  will  probably  never 
be  removed. 

It  may  be  discovered  that  in  a  given  country  one  reason 
for  the  scarcity  of  men  of  high  ability  in  industry  is  that 
it  is  the  custom  of  the  country  for  men  to  retire  from  busi- 
ness to  a  life  of  elegant  leisure  as  soon  as  they  are  finan- 
cially able  to  do  so.  Where  that  is  the  general  habit,  the 
most  capable  men  will  retire  at  an  early  age;  the  least 
capable  will  remain  in  business  longest.  Except  for  the 
brief  careers  of  men  of  great  capacity,  industries  in  such 
a  country  will  be  mainly  in  the  hands  of  second-  and  third- 
rate  men.  There  will  be  second-  and  third-rate  industries, 
which  can  pay  only  second-  and  third-rate  wages.  If  this 
is  discovered  to  be  a  factor  in  the  low  wage  levels  of  that 
country,  the  remedy  is  obvious,  though  it  may  be  difficult 
to  apply.  Those  who  rail  at  business  men  and  hold  them 
up  to  public  obloquy  because  they  do  not  retire  from  busi- 
ness and  begin  to  live,  as  they  express  it,  are  doing  dia- 
metrically the  wrong  thing.  They  make  capable  men 
more  reluctant  to  enter  industry  and  more  anxious  to  re- 
tire from  it  as  soon  as  they  can.  Those  Intellectual  men 
and  women  who  do  the  railing  would  do  infinitely  more  to 
benefit  labor  if  they  would  show  those  business  men  whom 
they  think  to  be  stupid  how  really  to  run  a  business  intel- 


6o  THIS  ECONOMIC  WORLD 

ligently,  that  is,  how  to  run  a  business  in  such  a  way  as  to 
be  able  to  pay  expenses  out  of  receipts.  Even  if  their 
literary  aptitudes  are  too  specialized  to  enable  them  to  pay 
high  wages,  they  could  at  least  use  their  literary  power  to 
make  some  men  who  have  practical  talent  not  only  go  into 
business  but  stay  in  business  as  long  as  they  can  retain 
their  business  capacity.  If  literary  men  could  accomplish 
that  result,  industries  would  tend  to  be  run  more  and  more 
by  first-rate  men,  to  become  first-rate  industries,  and  to 
pay  first-rate  wages. 

It  may  be  found  that  in  a  backward  country  the  equi- 
hbrium  wage  is  low  because  of  a  scarcity  of  capital.  If 
capital  is  scarce,  it  is  diflficult  to  equip  labor  with  the  best 
tools,  engines,  and  other  accessories.  If  that  is  the  case, 
the  productivity  per  man  must  be  small,  and  where  the 
productivity  per  man  is  small,  the  wages  per  man  must  be 
small  also.  Where  that  is  found  to  be  the  case,  the  obvi- 
ous thing  to  do  is  either  to  borrow  capital  from  other  coun- 
tries or  to  start  a  thrift  campaign  in  order  to  accelerate  the 
accumulation  from  within.  If  either  method  is  successful, 
it  will  then  be  possible  to  equip  industries  with  the  most 
powerful  engines  and  the  best  labor-saving  devices,  and 
this  will  make  it  possible  to  pay  high  wages  to  such  labor- 
ers as  are  employed.  If  this  campaign  for  the  increase  of 
capital  is  a  part  of  a  general  campaign,  including  pro- 
grams for  the  reduction  of  the  number  of  ignorant  and  un- 
skilled laborers  and  for  the  increase  in  the  number  of 
technicians,  managers,  and  enterprisers,  it  will  result  in  a 
general  diffusion  of  prosperity  among  all  classes. 

The  following  tables  show  an  interesting  correlation 


THE  GREAT  ESCAPE 


6i 


between  the  equipment  in  the  form  of  capital  per  worker 
and  the  productivity  per  worker  on  the  one  hand,  and 
also  an  equally  Interesting  correlation  Between  the  pro- 
ductivity per  worker  and  the  wages  per  worker. 

Productivity  per  Acre  and  per  Person  Engaged  in 
Agriculture  in  Various  Countries* 


Ratio  of 

Index 

Production 

Figure  of 

per  Man, 

Acres  per 

Index 

Production 

United 

Countries 

Year 

Person 

Figure  of 

per  Person 

States  to 

Engaged  in 

Productivity 

Engaged  in 

Countries 

Agriculture 

per  Acre 

Agriculture 

Indicated 

United  Kingdom 

190 1 

7.1 

177 

126 

2.3 

France 

1901 

7  3 

123 

90 

3-2 

Germany 

1907 

71 

167 

119 

2.S 

1900 

71 

113 

80 

36 

Belgium 

1900 

53 

221 

117 

2.5 

Italy 

1901 

4.7 

96 

45 

6.5 

1900 

27.0 

108 

292 

•From  United  States  Department  of  Agriculture,  Yearbook,  1918,  Table  290,  p.  693. 

We  may  summarize  the  argument  presented  under  the 
general  head  of  Extrication  No.  7,  balancing  the  economic 
functions,  by  pointing  out  that  a  wide  diffusion  of  such 
prosperity  as  the  physical  resources  permit  will  exist  in 
any  country  In  which  the  following  factors  are  at  work. 

I.  A  democratic  tradition  under  which  {a)  every  per- 

COMPARISON   OF   26    INDUSTRIES   IN   THE   UnITED    StATES 

and  the  United  Kingdom* 

United  States  (1909)     United  Kingdom  (1907) 


Number  of  workers 1,983,000 

Horse  power  used 4,779,000 

Horse  power  per  1,000  workers. .  2,400 
Gross  output  per  worker  per  year  $8,735 
Net  output  per  worker  per  week  $79 


1,700,000 

2,009,000 

1,200 

$3,100 

$11 


•From  J.  Ellis  Barker,  Economic  Statesmanship,  pp.  519,  524. 


62 


THIS  ECONOMIC  WORLD 


Real  Wages  in  Foreign  Countries  and  the  United 
States,  January  to  October,  1925* 


City 


October,  1925 

July,  192s 

January,  1925 

100 

100 

100 

88 

81 

69 

76 

77 

70 

64 

S3 

41 

S3 

SS 

4S 

52 

4S 

38 

46 

46 

37 

46 

40 

36 
33 

3S 

34 

29 

33 

33 

27 

31 

32 

28 

31 

28 

29 

28 

28 

23 

27 

23 

28 

26 

23 

26 

27 

21 

Philadelphia 

Ottawa 

Sydney,  N.  S.  W. 

Copenhagen 

London 

Oslo 

Amsterdam 

Stockholm 

Paris 

Berlin 

Lodz 

Brussels 

Prague 

Warsaw 

Rome 

Vienna 

Milan 


*From  data  collected  by  the  International  Labor  Office  of  the  League  of  Nations. 

son,  however  humble  his  origin,  Is  encouraged  to  make 
the  most  of  himself  and  to  climb  as  high  on  the  economic 
ladder  as  his  ability  and  training  will  permit,  and  (b)  all 
useful  occupations  are  regarded  as  equally  honorable  and 
In  which,  specifically,  technical  managerial  and  entrepre- 
neurial positions  are  held  in  as  high  esteem  as  the  so- 
called  learned  professions  or  even  literary  and  artistic 
careers,  so  that  a  fair  share  of  the  best  talent  of  the  coun- 
try is  encouraged  to  seek  these  so-called  practical  careers. 

2.  Habits  of  hard  and  prolonged  work  on  the  part  of 
prosperous  men  which  will  keep  them  at  work  even  after 
they  have  enough  wealth  to  enable  them  to  live  In  ease  and 
luxury. 

3.  An  efficient  system  of  free  and  universal  education, 
by  means  of  which  men  are  enabled  to  climb  as  high  on 
the  economic  ladder  as  their  natural  ability  and  their  am- 


THE  GREAT  ESCAPE  63 

bition  will  permit,  thus  thinning  out  the  numbers  in  the 
lower  and  less  well  paid  occupations  and  training  more 
high-grade  men  for  the  technical  and  managerial  posi- 
tions, who  can  so  organize  and  equip  industries  as  to  make 
high  wages  possible. 

4.  An  effective  restriction  of  immigration  which  will 
prevent  other  and  less  prosperous  countries  from  shifting 
their  burdens  of  unemployment  and  low  wages  upon  the 
country  in  question. 

5.  A  high  standard  of  living  on  the  part  of  the  laboring 
classes  which  will  lead  them  to  postpone  marriage  and  the 
raising  of  families  until  they  are  economically  able  to 
support  them  on  the  high  standard;  especially,  a  rational 
standard  of  living  which  will  lead  them  to  postpone  mar- 
riage until  they  can  provide  safety  for  their  families  in  the 
form  of  savings  deposits,  insurance,  and  small  invest- 
ments. 

6.  Widespread  habits  of  thrift  which  will  ensure  a 
rapid  accumulation  of  capital,  ample  equipment  for  all 
industries,  and  low  rates  of  interest. 

7.  Control  of  drunkenness  and  other  forms  of  intem- 
perance which  destroy  the  necessary  virtue  of  dependa- 
bility. 

Flight  to  new  lands;  work,  organization,  and  invention; 
control  of  rapine  and  predation;  responsible  parenthood; 
balancing  the  economic  functions  of  men — such  have  been 
and  still  are  the  principal  expedients  whereby  mankind 
has  escaped  the  clutches  of  want.  But  the  success  of  these 
expedients  depends  upon  the  will  and  the  skill  to  use  them. 


64  THIS  ECONOMIC  WORLD 

The  races  and  nations  of  mankind  are  not  and  never  have 
been  equally  intelligent  and  resourceful  in  devising  and 
adopting  those  institutions  and  customs  which  enable  the 
populations  in  some  measure  to  avoid  widespread  poverty. 
There  are  parts  of  the  world  whose  peoples  are  improvi- 
dent and  irresponsible,  and  the  pressure  of  want  against 
their  ineffectual  resistance  is  a  danger  to  the  defences  of 
those  peoples  that  have  for  the  time  successfully  repelled 
the  common  enemy. 

The  greatest  tragedies  of  history  are  the  results  of  the 
covetousness  of  the  improvident  and  the  Inability  of  the 
more  industrious  and  provident  to  fight  them  off.  The 
immediate  results  are  quite  as  pathetic  and  the  ultimate  re- 
sults far  more  destructive  than  those  that  follow  the  con- 
quest of  a  backward  tribe  by  a  more  advanced  nation,  as 
when  Europeans  conquered  the  native  Americans.  In 
other  words,  the  submergence  of  a  civilization  by  barbaric 
conquest  Is  even  more  tragic  than  the  forcible  imposition 
of  a  higher  upon  a  lower  civilization. 

So  evenly  balanced  are  the  forces  of  production  and  de- 
struction in  social  life,  or,  to  put  it  figuratively,  so  evenly 
balanced  are  the  processes  of  anabolism  and  catabolism 
in  our  social  metabolism,  that  a  seeming  trifle  may  turn 
the  balance  one  way  or  the  other.  When  the  balance  Is 
slightly  in  favor  of  production,  there  Is  progress  and  a 
larger  and  better  human  life.  When  the  balance  is  even 
slightly  on  the  side  of  destruction,  there  is  retrogression 
and  a  narrowing  down  of  the  possibilities  of  human  llfe.^ 

^  So,  likewise,  is  there  an  almost  even  balance  of  the  forces  of  good  and 
evil,  of  truth  and  error,  of  health  and  sickness,   and  so  on  and  so  on. 


THE  GREAT  ESCAPE  65 

Those  parts  of  the  world  that  have  succeeded  In  produc- 
ing increasing  quantities  of  food  (that  is  to  say,  Europe 
and  America)  and  in  feeding  their  people  better  than 
others  are  fed,  owe  more  than  they  are  perhaps  aware  to 
the  fact  that  superior  firearms  are  numbered  among  their 
many  inventions.  Otherwise  it  is  not  certain  that  they 
would  not  long  ago  have  been  overrun  by  hungry  hordes 
from  other  regions  who  are  forever  looking  for  some- 
thing more  to  eat. 

It  will  probably  never  be  known  just  what  destroyed 
the  various  prehistoric  civilizations  that  once  existed  on 
the  American  continent,  from  the  so-called  mound  build- 
ers of  the  Upper  Mississippi  Valley  to  the  Mayas  of 
Yucatan,  since  they  had  all  disappeared  before  the  advent 
of  the  European.  There  is  no  evidence  that  they  were 
conquered  by  a  superior  civilization,  as  was  the  case  when 
Mexico  and  Peru  were  conquered  by  the  Spaniards.  If 
that  had  been  the  case,  the  conquering  civilizations  must 
certainly  have  left  some  trail.  As  good  a  guess  as  any  is 
that  those  earlier  civilizations  perished  because  they  were 
not  able  to  defend  themselves  against  the  incursions  of 
their  savage  and  therefore  hungry  and  covetous  neigh- 
Probably  few  of  us  realize  how  definitely  the  balance  was  turned  in  favor 
of  truth  as  against  organized  superstition  by  the  invention  of  the  mariner's 
compass,  which  enabled  navigators  to  demonstrate,  against  all  the  sophis- 
tries of  ecclesiastical  pedants,  the  sphericity  of  the  earth.  The  telescope, 
the  balance,  and  a  few  other  mechanical  devices  added  to  the  advantage. 
Otherwise,  the  world  would  have  been  about  equally  divided  to  this  day 
between  those  who  believed  in  the  sphericity  and  those  who  did  not. 
Probably  the  slow  progress  which  the  doctrine  of  evolution  is  making 
among  the  masses  is  the  result  of  a  lack  of  some  mechanical  contrivance 
that  will  demonstrate  it  to  the  eye  and  silence  the  sophist.  Economics  is 
especially  in  need  of  such  a  silencer. 


66  THIS  ECONOMIC  WORLD 

bors.  The  same  fate  may  yet  overtake  the  civHIzation  of 
Europe  and  America  if  the  people  to  the  east,  south,  and 
west  ever  become  hungry  enough  and  therefore  desperate 
enough. 

The  almost  even  balance  between  the  forces  of  truth 
and  error  is  illustrated  by  the  all  but  convincing  argu- 
ments which  the  incompetent  and  the  improvident  every- 
where can  present  to  show  why  they  have  a  right  to  share 
in  the  good  fortune  of  the  competent  and  the  provident. 
"The  earth  is  for  all;"  "No  group  should  be  permitted  to 
play  the  dog  in  the  manger  by  refusing  to  let  others  share 
in  the  bounty  which  it  enjoys,"  and  other  catch  phrases 
have  a  strong  appeal.  By  means  of  such  sentiments,  im- 
provident nations  which  have  permitted  themselves  to  be- 
come overcrowded,  either  because  of  an  ineffective  use  of 
their  land  or  because  their  family  systems  have  permitted 
a  too  rapid  increase  of  numbers,  can  convince  themselves 
that  the  more  provident  nations  are  acting  unjustly  when 
they  are  merely  taking  the  most  elementary  precautions 
against  overpopulation  and  hunger. 

It  is  a  depressing  thought  that  every  economic  Zion 
which  the  world  has  ever  seen  has  been  destroyed  in  one 
of  two  ways.  If  a  group  of  people  anywhere  ever  suc- 
ceed in  developing  superior  institutions  which  put  them 
definitely  on  the  road  to  prosperity  or  to  achieve  a  higher 
degree  of  comfort  and  happiness  than  are  enjoyed  by  their 
neighbors,  these  neighbors  immediately  demand  the  privi- 
lege of  sharing  in  that  prosperity  and  are  not  satisfied 
with  the  privilege  which  they  already  possess  of  achieving 
a  similar  prosperity  for  themselves  by  copying  the  institu- 


THE  GREAT  ESCAPE  67 

tions  which  have  made  the  fortunate  group  so  prosperous. 
The  prosperous  group  Is  then  in  a  dilemma,  either  horn  of 
which  may  be  fatal.  If  it  keeps  Its  neighbors  out,  they 
will  resent  such  action  and  may  combine  to  destroy  it  by 
military  invasion.  If  it  welcomes  its  neighbors,  they  will 
spoil  Its  economic  Zion  by  their  improvident  vices  or  by 
an  overturn  of  the  institutions  that  have  made  it  prosper- 
ous. Even  this  proposition  is  not  sufficiently  obvious  to 
the  average  mind  to  make  It  certain  that  the  fortunate 
group  will  not  deliberately  commit  group  suicide  by  a  too 
liberal  policy  toward  those  who  demand,  as  a  God-given 
right,  the  privilege  of  sharing  the  prosperity  which  the 
superior  institutions  of  the  fortunate  group  enabled  it  to 
achieve. 

Whether  our  economic  Zion  Is  conceived  of  as  a  large 
group,  similar  to  that  now  called  the  nation,  as  a  middle- 
sized  group,  such  as  a  patriarchal  clan,  a  village  com- 
munity, or  a  religious  colony,  or  as  a  tiny  group  such  as  a 
monogamic  family,  the  dangers  are  the  same  and  the 
remedies  not  very  unlike.  The  fact  that  the  group — 
large,  middle-sized,  or  small — becomes  more  prosperous 
than  other  groups  of  the  same  nature  is  a  cause  of  resent- 
ment and  a  stimulation  to  covetousness.  It  Is  useless  to 
point  out  to  the  Improvident  that  the  principles  of  eco- 
nomics are  universal  and  that  the  same  institutions  and 
habits  that  make  one  prosperous  will  make  all  the  others 
prosperous — at  least  up  to  the  limit  set  by  their  natural 
resources.  All  the  improvident  groups  would  prefer  to 
share  the  prosperity  of  the  provident  rather  than  to  work 
out  their  own  economic  salvation.     In  the  last  analysis 


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68 


THE  GREAT  ESCAPE  69 

it  simply  means  that  they  would  rather  gratify  sex  and 
then  share  the  prosperity  of  those  who  practise  continence 
than  to  achieve  their  own  group  prosperity  by  postponing 
marriage  until  they  are  able  to  support  families  in  com- 
fort. Racial  memories  are  so  stirred  and  iridescent  ideal- 
ism so  stimulated  by  romantic  allusions  to  matters  of  sex 
as  to  drown  out  the  voice  of  reason  when  it  calls  attention 
to  the  consequences  of  that  form  of  improvidence  which 
consists  in  the  reckless  and  irresponsible  begetting  of  off- 
spring. 

But  in  spite  of  voices  of  despair  about  our  economic  sal- 
vation, the  struggle  still  goes  on.  The  Great  Escape  is 
never  permanently  achieved  in  this  economic  world.  Man 
may  never  breathe  freely,  forever  secure  from  want.  But 
if  the  circumstances  with  which  he  struggles  are  still 
fraught  with  danger  to  his  very  existence,  man  is  still  in- 
genious— he  still  devises  his  economic  strongholds.  And 
he  has  that  in  him  which  will  not  surrender. 


II 


"SOMEHOW  GOOD" 

WE  HAVE  dramatized  our  economic  world  some- 
what by  presenting  it  as  a  story  of  escape  from 
want.  To  a  considerable  degree — and  in  certain  parts  of 
the  world — this  escape  has  been  relatively  successful.  Our , 
present  economic  system,  the  result  of  many  centuries  of 
trial  and  error  as  methods  of  testing  various  devices  for 
bettering  the  economic  condition  of  mankind,  may  now  be 
briefly  examined,  to  see  whether  it  is  not  at  least  as  good 
as  any  other,  and  whether  it  promises  continued  progress 
in  the  elimination  of  want.  If  we  call  our  chapter  "Some- 
how Good"  it  is  because  we  recognize  that  no  achieve- 
ment, economic  or  otherwise,  can  attain  perfection — for- 
tunately for  mankind,  for  with  perfection  forever  unat- 
tainable, he  may  forever  be  achieving  some  improvement. 
What,  then.  Is  our  present  economic  state?  For  a  sug- 
gestion of  this  interesting  theme,  we  find  at  the  close  of  a 
recent  book  on  Calvin  Coolidge  by  William  Allen  White 
the  following  significant  statement,  which  is  quoted  not  so 
much  for  what  it  says  about  Mr.  Coolidge  as  for  what  it 
says  about  the  country  in  general: 

Meanwhile,  into  these  new,  modern  times,  when  all  the  world 
is  clinging  to  the  old  order  with  terror  in  its  heart,  a  new  element 
of  justice  has  come.  Industry  by  its  mass  production  of  material 
things,  turning  them  out  of  the  factory  by  millions,  has  distributed, 

70 


"SOMEHOW  GOOD"  71 

through  the  ordinary  agencies  of  a  rather  sordid  commerce,  moun- 
tains of  material  things  springing  in  myriads  from  the  machines; 
distributed  them  with  no  puling  thought  of  justice,  but  only  be- 
cause the  mountains  could  not  pile  up  at  the  factory  doors.  These 
things — needs,  comforts,  luxuries,  houses,  clothes,  food,  fuel,  motor 
cars,  radio  sets,  telephones,  tooth  paste,  floor  coverings,  electric 
household  machines,  labor-saving  farm  tools,  cement  highways,  tall 
buildings,  public  halls,  dry  goods,  and  fancy  groceries — have  been 
spread  out  among  all  the  peoples  somewhat  equitably.  We  have 
made,  despite  the  reactionary  character  and  quality  of  our  politics, 
through  the  commercial  momentum  of  the  whirring  wheels,  a  kind 
of  justice  in  the  distribution  of  this  world's  goods;  an  equitable 
distribution  which  laws  and  political  forms  and  customs  would 
have  denied  to  us  under  the  reign  of  terror  in  our  hearts.  The 
fountain  of  justice  blocked  at  its  political  source  has  gushed  forth 
in  an  unexpected  vent.  The  mysticism  of  Coolidge  and  the  leaders 
of  his  day,  their  faith  in  the  occult  power  of  mere  business  to 
produce  justice,  is  thus  somewhat  justified. 

Alongside  of  this  we  should  like  to  place  a  quotation 
from  a  letter  received  from  a  minister  of  religion,  Dr. 
Walter  Henry  MacPherson,  of  Jollet,  Illinois.  The  let- 
ter was  written  after  reading  a  recent  book  by  an  obscure 
author,  entitled  The  Present  Economic  Revolution  in  the 
United  States.    It  closed  with  the  following  statement: 

It  will  help  me  to  stand  by  my  own  guns  with  more  faith  in 
what  is  to  me  a  growing  conviction:  that  the  preacher  who  can't 
see  God  in  present-day  economic  life  will  never  see  him. 

These  two  quotations,  taken  together,  suggest  an  in- 
teresting theme  and  may  be  used  as  a  starting  point  for 
some  general  remarks  about  our  present  economic  system. 
Mr.  White  frankly  admits  that  something  resembling 
what  men  call  justice  has  emerged,  unexpectedly  to  some, 
from  the  great  economic  machine  which  many  profess  to 


72  THIS  ECONOMIC  WORLD 

fear.  The  minister  of  religion  seems  to  think  that  an  eco- 
nomic system  which  can  produce  such  results  as  are  now 
being  produced  must  have  God  in  it  somewhere.  It  is  the 
aim  of  this  chapter  to  show  that  the  crude  justice  which 
emerges  is  not  an  accident  but  a  necessary  product  of  the 
machine — in  short,  that  substantial  justice  inheres  in  the 
very  nature  of  the  economic  system  under  which  we  live. 
Only  a  few  minds,  perhaps,  are  as  yet  able  to  see  the 
order  in  the  apparent  chaos.  It  took  scientific  minds  a 
long  time  to  discern  the  order  in  the  physical  universe;  to 
see  that  it  was  not  a  mere  phantasmagoria  of  moving 
objects,  changing  seasons,  storms,  pestilences,  and  dis- 
asters. At  first  it  was  only  the  spirit  of  prophecy  that 
could  hear  the  voice  singing  in  silence,  in  spite  of  the 
great  and  mighty  wind,  the  earthquake,  and  the  fire. 
Later,  the  laborious  scientist  discovered,  by  the  tedious 
method  of  observation,  experiment,  and  inference,  that 
all  things  hang  together  and  make  a  universe  instead  of 
an  unordered  storm  of  atoms.  We  shall  attempt  to  make 
clear  to  our  readers  that  the  economic  system  under  which 
we  live  is  not  a  mere  whirlwind  of  disorganized  human 
motives  and  passions,  but  that  it  is  an  orderly  system,  hav- 
ing somewhere  at  its  center  a  principle  of  right  and  justice 
which  produces,  in  the  long  run,  somewhat  equitable  re- 
sults, not  by  accident,  but  by  a  law  of  its  own  nature. 

CONDITIONS  FOR  A  WELL  BALANCED  JUDGMENT 

In  order  to  arrive  at  a  sound  conclusion  regarding  any 
economic  system,  it  is  necessary  to  approach  our  study 


"SOMEHOW  GOOD"  73 

with  the  scientific  spirit  and  lack  of  bias  with  which  a 
physical  scientist  approaches  his  subject.  It  is  much  more 
difficult,  however,  to  attain  this  impersonal  balance  in 
studying  a  system  of  which  we  are  ourselves  parts  than  it 
is  when  we  study  any  problem  in  physical  science.  The 
physical  scientist  is  not  likely  to  have  inherited  any  preju- 
dice in  favor  of  or  against  any  of  the  factors  in  his  prob- 
lem. He  is  not  compelled  to  divest  himself  forcibly  of 
personal  interests  or  preconceived  prejudices.  The  eco- 
nomist, on  the  other  hand,  is  himself  a  factor  in  many  of 
the  problems  he  is  called  upon  to  study;  his  friends,  rela- 
tives, and  his  occupational  class  are  also  factors.  Every 
economic  policy  is  not  only  likely  to  affect  him  and  his 
friends,  but  there  will  always  be  active  partisans  in  the 
field,  trying  to  create  sentiment  for  or  against  it.  Under 
these  conditions,  it  is  exceedingly  difficult  to  preserve  an 
unbiased  mind  and  a  well  balanced  judgment. 

If  you  will  always  speak  of  the  present  social  order 
with  a  wry  face  and  of  some  other  social  order  with  a 
beatific  expression,  you  can  so  impress  certain  impression- 
able people  as  to  lead  them  to  form  a  very  poor  opinion 
of  the  one  system  and  a  very  good  opinion  of  the  other, 
without  much  regard  to  facts  or  reasoning.  Even  with- 
out the  use  of  facial  calisthenics,  you  can  accomplish  the 
same  result  by  invective  on  the  one  hand,  and  panegyric  on 
the  other,  and  by  the  general  substitution  of  innuendo 
and  metaphor  for  temperate  statements  of  verifiable  facts 
and  logical  reasoning  on  the  basis  of  these  facts. 

One  can  always  make  out,  from  the  standpoint  of  the 
uncritical,  a  strong  case  for  one  thing  and  against  another, 


74  THIS  ECONOMIC  WORLD 

by  mentioning,  in  exaggerated  form,  the  attractive  fea- 
tures of  the  one  and  the  unattractive  features  of  the  other. 
By  this  method  one  can  appear  to  prove  that  man  is  lower 
than  the  brute  and  the  civilized  man  lower  than  the  sav- 
age. In  fact,  certain  Oriental  pessimists  used  to  prove  to 
their  own  satisfaction  that  man  was  actually  the  lowest 
and  most  repulsive  of  all  creatures  by  describing,  with 
nauseating  particularity,  the  obscenities  of  the  human 
body.  A  considerable  mass  of  literature  is  arising  nowa- 
days whose  sole  aim  is  to  exaggerate  the  obscenities  of  the 
body  politic.  Another  mass  Is  engaged  in  describing.  In 
equally  exaggerated  form,  the  beauties  of  some  other  sys* 
tern. 

PRECONCEIVED  PREJUDICES 

Some  economists  have  believed  for  a  long  time  that  the 
present  economic  system  had  in  it  almost  Infinite  possi- 
bilities of  progress  If  it  were  intelligently  directed  or  given 
a  fair  trial.  There  have  been  pessimists,  however,  who 
saw  no  good  in  it,  or  who  at  least  thought  that  it  had 
reached  Its  limit.  The  more  optimistic  have  regarded  the 
acknowledged  evils  of  inequality  and  poverty  as  super- 
ficial and  temporary,  even  though  they  improve  very 
slowly.  The  more  pessimistic  have  regarded  them  as  In- 
herent in  the  very  nature  of  the  system  and  therefore  In- 
capable of  cure  except  by  a  complete  overthrow  of  the 
system  and  the  substitution  of  another.  "The  rich  grow 
richer  and  the  poor  poorer"  has  become  to  them  a 
formula. 

There  were  certain  large  and  visible  facts  which,   if 


"SOMEHOW  GOOD"  75 

taken  without  analysis,  seemed  to  give  an  advantage  in 
the  argument  to  the  pessimists.  Manual  labor  had  always 
been  oversupplied.  That  being  the  case,  there  was  neces- 
sarily unemployment  for  many  or  low  wages  for  all.  On 
the  other  hand,  it  was  pointed  out  that  if  the  number  of 
jobs  could  be  sufficiently  increased  and  the  number  of  man- 
ual' workers  sufficiently  decreased,  there  would  no  longer 
be  an  oversupply  of  manual  labor  and  there  would  then 
of  necessity  be  steady  employment  at  high  wages  for  all. 
The  real  question  then  became,  "Can  the  number  of  jobs 
be  sufficiently  increased  and  the  number  of  manual  work- 
ers sufficiently  decreased  to  eliminate  the  oversupply  of 
manual  labor?"  "It  can't  be  done,"  said  one  school.  "It 
can,"  said  the  other.  "Where  has  it  ever  been  done?" 
asked  the  one.  "The  fact  that  it  has  never  been  done  is 
no  reason  for  saying  that  it  can't  be  done,"  said  the  other. 
"Why  hasn't  it  been  done?"  asked  the  one.  "Because 
our  policy  has  never  been  consistently  tried  out,"  affirmed 
the  other. 

The  appeal  to  crude  historical  facts  without  any  at- 
tempt to  analyze  economic  tendencies  seemed  to  give  the 
advantage  to  the  pessimists.  Crude  facts  can  be  pre- 
sented in  dramatic  form;  economic  tendencies  can  be  pre- 
sented only  in  theoretical  or  statistical  form,  and  neither 
economic  theories  nor  statistics  have  high  penetrating 
power.  The  slums  and  other  masses  of  poverty  were  visi- 
ble and  seemed,  to  the  unanalytical  eye,  to  persist.  Analy- 
sis showed  that  though  in  this  country  the  slums  persisted, 
their  personnel  changed.  They  were,  like  a  reservoir, 
drained  by  one  stream  and  fed  by  another.     It  began  to 


76  THIS  ECONOMIC  WORLD 

appear  that  if  the  stream  that  fed  the  skims  could  be  shut 
off  and  the  other  streams  kept  actively  flowing,  the  slums 
would  drain  themselves.  The  restriction  of  immigration 
was  a  beginning,  and  even  the  optimists  were  surprised 
at  the  promptness  with  which  the  balance  was  changed. 
For  the  first  time,  the  optimists  have  the  advantage  of 
being  able  to  present  large  historical  facts  in  favor  of 
their  contention.  They  always  had  the  advantage  in  the 
theoretical  argument. 

There  are  some,  however,  who  still  close  their  eyes  to 
what  is  going  on  all  around  them  and  continue  to  repeat 
the  old  formulas.  Even  those  who  admit  that  prosperity 
is  being  widely  diffused  in  this  country  are,  in  some  cases, 
insisting  that  it  will  not  last.  This  turns  the  controversy 
back  into  the  field  of  logical  analysis,  sometimes  called 
economic  theory.  The  optimists  argue  that  the  same 
factors  and  forces  that  have  brought  about  the  present  de- 
gree of  diffusion  can  be  kept  active  and  that,  if  they  are, 
they  will  not  only  preserve  the  present  condition  of  dif- 
fusion but  carry  us  much  farther  than  we  have  yet 
dreamed  of  going  toward  equality  of  prosperity  for  all 
classes.  To  be  specific,  they  aflirm  that  this  tendency  will 
last  just  as  long  as  we  continue,  on  the  one  hand,  to  in- 
crease the  number  of  jobs  by  encouraging  our  ablest  men 
to  go  into  business  and  expand  our  industries,  and,  on  the 
other,  to  decrease  the  number  of  workers;  first,  by  re- 
stricting immigration  more  and  more,  especially  by  re- 
stricting the  wholesale  importation  of  low-wage  laborers 
from  Mexico;  second,  by  a  sound  educational  policy  which 
regularly  moves  the  working  population  upward  in  the 


"SOMEHOW  GOOD"  77 

economic  scale,  Increasing  the  numbers  who  are  fitted  for 
the  higher  business  positions  and  decreasing  the  numbers 
who  are  fitted  only  for  the  lower  wage  positions;  third, 
by  discouraging  drunkenness,  which  hinders  promotion 
and  tends  to  congest  the  lower  wage  occupations.  When 
the  scarcity  of  manual  labor  becomes  the  limiting  factor 
In  industry,  then  the  manual  workers  will  be  in  a  position, 
not  only  of  prosperity  but  of  independence  and  power  as 
well. 

The  tendency  toward  diffusion  will  stop  when  but  not 
until  we  reverse  the  process  by  doing  one  or  more  of  sev- 
eral things.  We  can  reverse  the  process  by  discouraging 
our  ablest  men  from  going  Into  business  and  expanding 
our  Industries.  When  our  Industries  are  run  by  second- 
and  third-rate  men,  we  shall  have  second-  and  third-rate 
industries  which  cannot  expand  nor  employ  large  numbers 
of  men.  We  can  discourage  our  ablest  men  from  entering 
industry  In  several  ways.  We  can  discourage  them,  for 
example,  by  cultivating  a  general  jealousy  of  or  resent- 
ment toward  those  who  are  successful  In  building  great 
enterprises  or  in  making  two  jobs  to  grow  where  one  grew 
before.  We  can  also  discourage  them  by  changing  our 
educational  policy  and  aiming  to  produce  In  our  universi- 
ties men  fitted  only  for  graceful  consumption,  elegant 
leisure,  or  the  more  ornamental  professions.  We  can  also 
work  for  concentration  rather  than  diffusion  of  wealth  by 
discouraging  thrift  and  decreasing  the  supplies  of  capital. 
We  can  do  this  by  writing  books  on  the  fallacy  of  saving 
and  by  carrying  on  an  active  propaganda  in  favor  of  lav- 
ish expenditure  on  the  part  of  all  classes.    We  can  do  It 


78  THIS  ECONOMIC  WORLD 

also  by  endowing  Institutes  to  further  the  cause  of  ex- 
travagance, thus  limiting  the  profits  of  accumulation  and 
ownership  to  the  few  and  keeping  the  masses  "in  their 
places." 

PERFECTION  NOT  YET  ATTAINED 

In  order  to  combat  the  pessimistic  propaganda  of  our 
times  it  is  not  necessary  to  assume  that  the  present  eco- 
nomic system  is  working  perfectly  or  that  there  are  no 
evils  growing  out  of  it.  If  that  were  true,  we  should  have 
reached  the  goal  of  social  progress,  and  there  would  be 
nothing  more  to  be  done  except  to  enjoy  the  economic 
Eden  to  which  our  portion  of  the  human  race  had  been  re- 
stored. Whatever  uncertainties  there  may  be  as  to  the 
ultimate  perfectibility  of  our  economic  system,  one  thing 
is  certain,  namely,  that  perfection  has  not  yet  been  at- 
tained and  is  not  likely  to  be  within  any  period  of  time 
in  which  we  have  any  practical  interest.  Nor  is  it  likely 
that  a  time  will  ever  be  reached  in  which  there  Is  not  some 
conflict  of  interests  among  individuals  within  any  eco- 
nomic system. 

The  question,  therefore,  is  not  whether  we  have  at- 
tained perfection  in  our  present  economic  system  but  it  Is, 
first,  does  the  present  economic  system  contain  possibili- 
ties of  improvement  that  will  bring  us.  In  the  course  of 
time,  more  and  more  nearly  to  some  ideal  of  perfection? 
and  second,  are  we  actually  making  progress  in  that  direc- 
tion and  can  we  continue  to  make  progress  without  scrap- 
ping the  whole  of  our  Industrial  civilization  and  starting 
over  again  with  an  entirely  new  system?     Unless  we  are 


"SOMEHOW  GOOD"  79 

convinced  beyond  a  reasonable  doubt  that  further  prog- 
ress toward  our  ideals  is  impossible  under  the  present 
system,  it  would  seem  the  part  of  wisdom  to  preserve  it  in 
its  essential  characteristics  and  to  make  such  numerous 
and  detailed  improvements  as  the  process  of  trial  and 
error  shows  to  be  necessary  from  time  to  time. 

It  may  be  useful  to  remark,  more  or  less  parenthetic- 
ally, that  this  much  despised  process  of  trial  and  error  has, 
up  to  the  present  time,  produced  better  results  in  every 
field,  from  mechanics  to  nation  building,  than  any  other 
method.  Experience  seems  to  have  proved  that  no  mind 
is  great  enough  to  understand  in  advance  all  the  factors 
that  are  at  work  in  the  production  of  any  single  result. 
No  mind,  therefore,  is  capable  of  predicting  in  advance 
exactly  what  will  happen  as  the  result  of  any  experiment 
or  disturbance  of  an  existing  balance.  Owing  to  the  com- 
plexities of  every  problem  and  the  limitations  of  the  hu- 
man mind,  men  have  been  compelled  to  fall  back  upon  the 
method  of  trial  and  of  experiment,  preserving  those 
methods  that  turn  out  well  and  rejecting  those  that  turn 
out  badly.  No  mechanical  genius  was  ever  capable  of 
making,  in  the  first  experiment,  a  satisfactory  gasoline 
engine.  Thousands  of  experiments  were  necessary  before 
anyone  ever  made  an  engine  that  worked  even  tolerably 
well.  No  breeder  of  animals  or  plants  ever  knew  enough 
about  the  forces  of  heredity  to  be  able  to  predict  in  ad- 
vance just  what  the  results  of  a  given  breeding  experiment 
would  be.  He  has  had  to  try  numberless  experiments  in 
order  to  produce  a  plant  or  animal  after  his  own  Ideals. 
Not  only  in  mechanics,  but  in  animal  and  plant  breeding, 


8o  THIS  ECONOMIC  WORLD 

the  most  creative  minds  have  been  the  most  indefatigable 
experimenters. 

The  world  has  been  a  great  sociological  experiment. 
Thousands  of  experiments  have  been  tried  with  all  sorts 
of  social  plans,  institutions,  and  systems.  Up  to  the  pres- 
ent time,  the  one  under  which  we  are  now  living  has  pro- 
duced somewhat  better  results  or,  to  put  it  mildly,  has 
worked  a  httle  less  badly  than  any  other.  A  mechanical 
engineer  or  a  plant  breeder  would,  under  similar  circum- 
stances, select  it  for  further  experimentation  and  improve- 
ment rather  than  scrap  It  altogether  and  start  with  some- 
thing that  was  entirely  new  and  untried. 

With  these  facts  staring  them  in  the  face,  however, 
there  has  been  no  lack  of  men  who  are  willing  to  assume 
their  own  abihty  to  perform  the  vastly  difficult  task  of  de- 
signing a  new  and  perfect  social  system.  A  wiser,  as  well 
as  a  more  modest,  policy  would  seem  to  be  to  study  the 
existing  system,  find  out  (so  far  as  human  intelligence 
can)  wherein  it  is  succeeding  and  wherein  it  is  failing,  and 
proceed  in  accordance  with  the  technology  of  reform,  as 
outlined  in  the  latter  part  of  Chapter  I,  to  correct  the  spe- 
cific difficulties  in  so  far  as  we  can. 

It  is  useless  to  hope  for  the  ultimate  elimination  of  all 
conflict  of  human  interests.  Wherever  there  is  scarcity 
there  is  a  conflict  of  interests.  Changing  the  social  order 
would  not  affect  this  one  way  or  the  other.  The  mere 
adoption  of  compulsory  cooperation  in  the  form  of  some 
sort  of  communism  or  socialism  would  not  affect  this  one 
way  or  the  other.  The  fact  that  compulsion  was  neces- 
sary would  itself  show  that  human  interests  were  not  com- 


"Men  early  discover  the  advantage  of  team-work  and  specialization. 
Through  organization  and  specialization  both  migration  and  work 
can  be  carried  on  much  more  successfully  than  without  organization.' 


"SOMEHOW  GOOD"  8i 

pletely  harmonious.  Neither  are  they  completely  antago- 
nistic. Every  possible  human  relationship  has  in  it  ele- 
ments of  harmony  as  well  as  elements  of  conflict^  It 
would  be  difficult  to  find  two  neighbors  anywhere  who  did 
not  have  some  interests  in  common  though  having  at  the 
same  time  some  conflicting  interests.  It  would  be  im- 
possible to  find  a  husband  and  wife  or  a  parent  and  child 
who  did  not  have  some  interests  in  common,  and  if  one 
looked  diligently  enough  he  would  probably  find  that  in 
most  cases  there  are  some  interests  that  come  in  conflict. 
Whether  they  live  in  peace  and  harmony  or  in  a  state  of 
enmity  will  depend  largely  upon  which  group  of  interests 
they  permit  themselves  to  think  about  most  of  the  time. 
If  they  permit  themselves  to  think,  most  of  the  time, 
about  the  satisfactions  that  income  will  produce,  they  are 
very  likely  to  discover  that  there  is  a  conflict  of  interests. 
The  husband  may  discover  that  he  could  spend  a  lot  more 
on  himself  if  his  wife  did  not  spend  so  much  on  herself, 
and  vice  versa.  In  short,  as  consumers  their  interests  are 
very  likely  to  come  in  conflict  in  more  ways  than  one.  If, 
however,  instead  of  thinking  primarily  about  the  satisfac- 
tions that  may  be  had  from  the  spending  of  money,  they 
think  of  the  common  enterprise  of  family  building  in 
which  one  needs  the  other  and  neither  can  accomplish 
much  without  the  other,  they  are  likely  to  discover  that 
they  have  very  large  Interests  in  common. 

The  same  principle  applies  to  every  possible  relationship. 
The  producer,  for  example,  needs  the  consumer,  the  em- 

^  See  Carver  and  Hall,  Human  Relations  (]).  C.  Heath  &  Company,  1923), 
chap.  xvii. 


82  THIS  ECONOMIC  WORLD 

ployer  the  employee,  and  vice  versa.  And  yet,  even  in 
these  relationships,  there  are  conflicts  of  interests  and 
causes  of  irritation.  When  producers  and  consumers  are 
dickering  over  prices,  the  conflict  of  interests  is  apparent 
and  may  loom  large  in  their  minds.  If  they  forget  every- 
thing else,  there  may  be  class  war  and  each  may  try  to  de- 
stroy or  injure  the  other;  and  yet  in  a  larger  sense  they 
have  so  many  interests  in  common  that  each  one  injures 
himself  in  proportion  as  he  injures  the  other. 

Every  institution  is  a  mixture  of  good  and  evil.  The 
evil  is  the  price  we  have  to  pay  for  the  good.  We  may 
resent  having  to  pay  the  price,  but  there  is  no  way  out  of 
it  in  this  world  or  any  other,  so  far  as  we  know.  Many 
of  us  do  not  like  to  work — at  least  beyond  a  certain  point 
where  fatigue  and  other  disagreeable  things  enter  in. 
Nevertheless,  we  desire  the  things  that  may  be  had  by 
work.  Work  is  the  penalty  we  have  to  pay  for  these  good 
things.  We  shall  do  well  to  content  ourselves  with  the 
effort  to  reduce  the  penalty  and  increase  the  reward  rather 
than  with  the  attempt  to  avoid  work  altogether.  The 
same  principle  must  apply  to  our  attitude  toward  all  our 
institutions.  If  we  focus  our  attention  upon  the  penalties 
and  forget  the  rewards,  we  shall,  of  course,  arrive  at  very 
pessimistic  conclusions.  We  should  all  be  optimists  if  we 
focused  our  attention  upon  the  rewards  rather  than  upon 
the  penalties. 

Marriage,  for  example,  sometimes  results  in  the  sub- 
jection of  women  and  children,  and  there  is  probably 
some  basis  for  the  cartoons  and  caricatures  of  the  hen- 
pecked husband.  And  in  many  other  cases  the  relationship 


"SOMEHOW  GOOD"  83 

of  marriage  requires  a  kind  of  behavior  or  discipline 
which  some  wild  and  undisciplined  natures  find  irksome. 
The  divorce  rate  indicates  that  considerable  numbers  find 
or  think  they  find  the  penalty  excessive.  One  could  even 
frame  a  strong  indictment  against  the  art  of  printing  by 
refusing  to  mention  any  of  the  good  things  that  have  come 
with  it  and  by  emphasizing  or  exaggerating  such  things 
as  the  yellow  journal  or  the  erotic  novel. 

THE  INSTITUTION  OF  PROPERTY 

The  institution  called  property  must  be  subjected  to  the 
same  process  of  evaluation.  There  are  many  abuses  con- 
nected with  it — many  penalties  we  have  to  pay  for  it. 
Many  a  man  who  would  otherwise  be  useful  is  enabled  to 
go  to  waste  because  he  can  live  on  inherited  wealth  or 
wealth  which  he  succeeded  in  storing  up  during  the  first 
half  of  his  productive  life.  When  he  decides  to  waste  a 
portion  of  his  potentially  productive  life  in  merely  regis- 
tering pleasurable  sensations  through  the  consumption  of 
wealth,  he  allows  himself  to  go  to  waste.  He  is  a  cum- 
berer  of  the  ground — a  barren  fig  tree — and  the  sooner 
he  emigrates  to  some  other  world  the  better  off  this 
world  will  be.  It  will  at  least  save  his  victuals  and  lose 
nothing  to  balance  this  saving.  Nevertheless,  in  spite  of 
all  the  wastes  and  costs  of  the  institution  of  property,  it 
is  rather  noticeable  that  there  are  more  necessaries  of  life 
for  everyone,  more  people  are  supported  and  supported 
more  abundantly,  where  property  is  recognized  and  pro- 
tected than  where  it  is  not. 


84  THIS  ECONOMIC  WORLD 

A  somewhat  clearer  illustration,  perhaps,  can  be  found 
in  the  case  of  our  patent  and  copyright  laws.  These  are 
monopolies.  They  give  the  inventor  of  a  mechanical  de- 
vice or  the  writer  of  a  book  the  power  to  control  its  sale. 
This  may  deprive  numerous  people  of  a  utility  that  they 
would  very  much  like  to  have.  When  we  look  at  it  from 
that  point  of  view  alone,  we  should  undoubtedly  say  that 
all  patent  and  copyright  laws  should  be  abolished.  On  the 
other  hand,  it  seems  that  there  are  more  inventions  in  use 
and  more  books  written  and  read  where  inventors  and 
authors  are  given  a  temporary  monopolistic  control  than 
where  they  are  not,  so  that  even  from  the  standpoint  of 
the  readers  of  books  and  the  users  of  the  products  of  in- 
vention, more  utility  is  available  where  this  form  of  mo- 
nopoly is  created  than  where  it  is  not. 

The  institution  of  property  is  sometimes  spoken  of  by 
its  enemies  as  though  it  were  some  piece  of  social  mechan- 
ism invented,  manufactured,  and  forced  upon  an  unwilling 
people.  As  a  matter  of  fact,  it  is  nothing  of  the  kind.  It 
is  merely  the  privilege  conferred  upon  the  maker  or  the 
first  discoverer  of  a  thing  to  call  it  his  own  or  to  enjoy  a 
certain  prior  claim  to  it  over  and  above  that  of  other  per- 
sons. In  fact,  all  that  is  necessary  to  create  an  institution 
of  property  (though  it  would  be  a  very  simple  and  crude 
one)  would  be  the  suppression  of  violence.  Wherever 
violence  is  repressed,  the  maker  of  a  thing  or  the  first  dis- 
coverer of  it  cannot,  of  course,  be  dispossessed  by  vio- 
lence. If  he  cannot  be  dispossessed  by  violence,  he  can 
enjoy  its  use  until  he  gives  it  up  voluntarily  to  someone 
else.    If  he  gives  it  up  voluntarily  to  another  person,  that 


"SOMEHOW  GOOD"  85 

other  person  cannot  be  dispossessed  by  violence  and  he,  in 
turn,  can  enjoy  it  until  he  gives  it  up  voluntarily  to  a  third 
person,  and  so  on,  indefinitely.  Property  would  exist,  not 
in  all  respects  as  it  now  exists,  but  it  would  exist  neverthe- 
less, if  the  government  did  nothing  in  the  world  except  to 
suppress  violence.  Of  course,  the  definition  of  property 
in  its  multifarious  forms,  and  the  determination  of  what 
constitutes  the  first  discovery,  the  first  manufacture,  valid 
possession,  valid  transfer,  and  so  forth,  raise  a  host  of 
minor  questions  which  will  keep  many  generations  of 
lawyers  busy. 

Many  of  these  definitions  may  be  changed,  but  so  long 
as  the  basic  fact  remains  that  the  maker  of  a  thing  or 
the  first  discoverer  of  it  cannot  be  dispossessed  without 
his  consent,  we  shall  have  an  institution  of  property. 
When  he  is  permitted  voluntarily  to  transfer  it  to  some- 
one else  and  that  person  is  also  protected  against  dispos- 
session without  his  consent,  we  shall  have  the  process  of 
exchange.  Property,  in  other  words,  automatically  exists 
in  one  form  or  another  wherever  violence  is  absent. 
Nothing  can  destroy  it  but  violence.  The  violence  that 
destroys  it  may  be  exercised  either  by  private  individuals 
in  the  form  of  banditry,  robbery,  and  the  like,  or  by  the 
power  of  government.  In  order  that  the  government  may 
destroy  property,  it  must  dispossess  the  maker  or  the  dis- 
coverer of  a  thing  without  his  consent. 

We  may  summarize  this  part  of  the  discussion  by  the 
statement  that  the  privilege  of  owning  what  one  has  made 
and  of  exchanging  It  with  someone  else  for  what  one 
would  like  to  have  is  about  all  that  is  really  essential  to 


86  THIS  ECONOMIC  WORLD 

the  institution  of  property.  This  appeals  to  the  best  that 
is  in  human  nature,  namely,  the  desire  to  produce  or  to 
create.  It  probably  explains  why  so  much  more  is  pro- 
duced where  this  privilege  is  recognized  than  where  it  is 
not,  and  why,  in  consequence,  more  people  can  be  sup- 
plied with  products  than  where  this  privilege  Is  not 
granted. 

IS  COMPETITION  AN  EVIL? 

One  great  source  of  difficulty  in  the  proper  appraisal  of 
our  present  economic  system  Is  the  open  assumption  in 
many  cases,  and  the  tacit  assumption  in  others,  that  what 
is  one  man's  meat  Is  another  man's  poison,  or  more  spe- 
cifically, that  everything  that  works  to  the  advantage  of 
one  man  must  necessarily  work  to  the  disadvantage  of 
someone  else,  that  competition  Is  wholly  a  matter  of  con- 
flict with  no  elements  of  harmony  in  It,  that  wherever 
one  man  makes  a  dollar  somebody  else  must  of  necessity 
lose  that  dollar,  and  so  on  and  so  on.  If  this  assumption 
were  true,  some  very  discouraging  deductions  would  follow 
from  it  with  irresistible  logic.  But,  of  course,  the  more 
logically  one  reasons  from  false  premises  the  further  he 
goes  astray  in  his  conclusions. 

A  good  illustration  of  this  method  of  reasoning  was 
contained  In  a  letter  received  recently  by  one  of  the 
authors  In  which  the  following  proposition  was  stated  as 
though  it  were  almost  self-evident:  "If  Mr.  Henry  Ford 
should  live  for  another  hundred  years  and  should  con- 
tinue making  money  as  rapidly  as  he  has  during  the  last 
twenty-five  years,  he  would  own  the  whole  world  and  the 


"SOMEHOW  GOOD"  87 

rest  of  us  would  all  be  in  the  poorhouse."  If  it  were  true 
that  every  time  he  made  a  dollar,  the  rest  of  the  world 
was  a  dollar  poorer,  that  conclusion  would  probably  fol- 
low. At  any  rate,  it  would  only  be  a  question  of  time 
when  he  would  own  the  whole  world  or  at  least  divide  it 
with  a  few  others  of  about  his  own  efficiency  in  acquiring 
money  from  other  people.  If,  however,  we  start  with 
another  assumption,  namely,  that  every  time  Mr.  Ford 
makes  a  dollar  he  makes  the  rest  of  the  world  ten  dollars 
richer,  a  diametrically  opposite  conclusion  would  follow. 
If,  on  this  assumption,  he  or  his  company  continues  for 
another  hundred  years  making  money  at  the  same  rate  as 
during  the  last  twenty-five  years,  the  rest  of  us  would  be 
many  times  richer  than  we  are  now  and  fewer  would  be  in 
the  poorhouse. 

The  question  of  the  future  of  our  economic  system 
really  turns  on  the  question.  Which  of  the  two  assump- 
tions is  more  nearly  correct?  If  it  is  generally  true  that 
everyone  who  adds  a  dollar  to  his  wealth  subtracts  a  dol- 
lar from  the  wealth  of  the  rest  of  the  world,  the  outlook 
is  indeed  hopeless.  In  fact,  if  that  were  true,  the  vast 
number  of  great  and  moderate  fortunes  already  made  in 
this  country  should  have  made  most  of  us  exceedingly 
poor.  The  fact  that  we  are  not  (at  least  as  compared 
with  other  countries  where  not  so  many  great  fortunes 
have  been  made)  casts  some  doubt  on  the  validity  of  the 
primary  assumption.  On  the  other  hand,  it  is  only  fair  to 
state  that  if  every  private  fortune  had  been  made  In  ways 
that  added  to  the  riches  of  the  rest  of  the  country,  the 
rest  of  us  ought  to  be  richer  even  than  we  now  are.    Ob- 


88  THIS  ECONOMIC  WORLD 

servatlon  as  well  as  logic  seems  to  lead  to  the  conclusion 
that  in  many  cases  private  fortunes  are  built  up  in  ways 
that  tend  to  enrich  the  rest  of  the  country,  and  in  many 
other  cases  they  are  built  up  in  ways  that  tend  to  im- 
poverish the  rest  of  the  country. 

If  we  are  once  convinced  of  this,  then  the  work  of  re- 
form is  fairly  well  determined.  Instead  of  attacking  the 
whole  system  or  attacking  those  who  have  earned  their 
fortunes  by  creating  more  wealth  for  the  rest  of  us  than 
they  have  absorbed  themselves,  along  with  those  who  ac- 
quire wealth  at  the  expense  of  the  rest  of  us,  it  is  evident 
that  we  should  discriminate  between  different  methods  of 
acquiring  wealth  in  order  that  we  may  suppress  those 
methods  by  which  unearned  wealth  is  accumulated  and 
protect  those  by  which  wealth  is  earned.  If  we  can  suc- 
ceed in  repressing  those  methods  by  which  unearned 
wealth  is  acquired,  we  shall  at  least  have  made  a  good  be- 
ginning. Under  the  conditions  thus  created,  the  more 
wealth  anyone  acquires,  the  richer  he  will  make  the  rest 
of  us.  We  need  not  then  worry  about  the  size  of  any 
man's  fortune.  To  resent  his  fortune  or  to  be  jealous  be- 
cause he  is  richer  than  the  rest  of  us  would  merely  be  an 
example  of  a  very  widespread  but  very  vicious  tendency  of 
vice  to  resent  virtue,  of  the  worthless  to  hate  the  worthy, 
of  the  unproductive  to  show  covetousness  toward  the  pro- 
ductive. A  system  thus  created  would  still  leave  us  the 
competitive  system,  the  institution  of  private  property, 
freedom  of  contract,  and  a  number  of  other  things  which 
contain  a  mixture  of  good  and  evil,  but  from  which  a 
great  deal  of  the  evil  had  been  extracted. 


"SOMEHOW  GOOD"  89 

Competition  is  a  perennial  subject  of  controversy.  It  is 
sometimes  asserted  that  the  very  idea  is  contrary  to  the 
whole  spirit  of  ethics  and  religion  as  expressed  in  the 
Golden  Rule;  but  a  great  deal  depends  upon  the  kind  of 
person  you  are.  If  you  are  the  kind  of  person  who,  in  a 
game  of  croquet,  would  desire  your  opponent  to  play 
poorly  in  order  that  you  might  have  an  easy  chance  to  win, 
then,  in  the  strict  spirit  of  the  Golden  Rule,  you  should 
yourself  play  poorly  in  order  to  give  him  an  easy  chance 
to  win.  If,  on  the  other  hand,  you  are  the  kind  of  person 
who  would  desire  your  opponent  to  play  his  best,  to  put 
you  on  your  mettle  and  thus  compel  you  to  play  your  best, 
then  an  equally  strict  application  of  the  Golden  Rule 
would  compel  you  to  play  your  best  to  put  him  on  his 
mettle  and  force  him  to  play  his  best.  Similarly,  in  eco- 
nomic competition,  if  you  are  the  kind  of  person  who 
would  desire  your  competitors  to  mismanage  their  busi- 
ness or  to  loaf  on  their  jobs  in  order  to  give  you  an  easy 
chance  to  win,  of  course  the  Golden  Rule  would  require 
you  either  to  mismanage  your  business  or  to  dawdle  along 
in  order  to  give  your  competitors  an  easy  chance  to  suc- 
ceed; but  if,  on  the  contrary,  you  are  the  kind  of  person 
who  would  desire  in  business,  as  in  an  athletic  game,  that 
your  competitors  should  do  their  level  best  to  win  and  to 
put  you  on  your  mettle  and  compel  you  to  do  your  level 
best,  then  I  submit  that  the  Golden  Rule  would  require 
you  to  do  the  same  to  them.  It  will  require  you  to  do 
your  level  best  to  win  and  to  put  your  competitors  on  their 
mettle  and  compel  them  to  do  their  very  best,  in  order  to 
stay  in  the  game. 


90  THIS  ECONOMIC  WORLD 

PROFIT 

Jealousy  of  individual  success  is  not  the  only  form  of 
covetousness  or  resentment.  Jealousy  of  national  success 
is  also  a  powerful  agent  in  the  world,  and  under  its  influ- 
ence jealous  nations  can  invent  all  sorts  of  unworthy  rea- 
sons to  explain  the  prosperity  of  other  more  successful 
rivals.  An  English  writer^  has  recently  predicted  that 
future  historians  will  explain  in  the  following  language 
the  slowness  with  which  European  people  are  recovering 
from  the  effects  of  the  World  War:  "Instead  of  putting 
all  their  energies  into  producing  the  things  needful  for 
civilization  and  repairing  a  ruined  world,  they  used  up  the 
best  part  of  those  energies  in  trying  to  prevent  each  other 
from  making  a  profit." 

The  independent  business  man  who  undertakes  to  run 
a  business  and  pay  its  expenses  out  of  its  receipts  stands  a 
greater  chance  of  loss  than  any  of  his  coworkers.  Wages 
must  be  paid  whether  there  is  anything  left  for  the  busi- 
ness man  or  not;  raw  materials  and  repairs  claim  another 
share.  If  he  borrows  capital,  interest  must  also  be  paid 
before  there  are  any  profits  or  dividends.  The  statistics 
of  failure  are  simply  appalling  and  should  convince  the 
most  skeptical  of  the  hazards  of  business. 

What  inducement  has  a  man  to  go  into  business  and  run 
all  these  risks?  The  hope  of  a  profit.  If  that  is  taken 
away,  no  new  businesses  will  be  started,  and  industry  will 
not  expand,  unemployment  will  increase,  and  earnings 
decrease. 


*  See  J.  St.  Loe  Strachey,  Economics  of  the  Hour,  New  York  and  London, 
G.  P.  Putnam's  Sons,  1923. 


"SOMEHOW  GOOD"  91 

It  is  a  very  primitive  notion  that  one  must  lose  what 
the  other  gains  in  every  transaction.  In  every  sound  busi- 
ness transaction,  both  gain.  The  general  willingness  to 
accept  this  as  a  fact  and  to  act  on  it  is  one  of  the  greatest 
factors  in  national  prosperity.  No  country  can  possibly 
prosper  where  this  fact  is  not  recognized.  No  country 
can  help  prospering,  unless  overwhelmed  by  a  war  or  a 
physical  disaster,  where  this  is  generally  accepted. 

THE  UNITED  STATES  AS  OBJECT  LESSON 

One  of  the  greatest  economic  puzzles  in  the  world  to- 
day is  the  amazing  prosperity  of  the  people  of  the  United 
States.  To  some  it  is  unbelievable  that  such  prosperity 
can  exist  in  a  world  where  there  is  so  much  general  unem- 
ployment and  poverty.  In  an  earlier  and  more  credulous 
age,  resentment  toward  such  success  would  express  itself 
in  the  proposition  that  we  must  be  in  league  with  the  devil. 
The  present  age  has  to  find  a  substitute  for  the  devil,  and 
those  who  resent  our  prosperity  are  likely  to  ascribe  it  to 
some  other  form  of  necromancy.  The  enlightened  eco- 
nomic world,  however,  realizes  that  prosperity  is  some- 
times earned;  that  one  man  may  grow  rich,  not  through 
the  impoverishment  but  through  the  enrichment  of  his 
fellow  men,  and  that  a  nation  may  prosper,  not  by  sub- 
tracting from  but  by  adding  to  the  wealth  of  other 
nations. 

A  somewhat  less  extreme  but  equally  mistaken  formula 
for  our  prosperity  is  that  we  are  pursuing  materialistic 
ideals  and  losing  our  souls  in  the  process.     Materialistic 


92  THIS  ECONOMIC  WORLD 

ideals,  however,  seldom  bring  such  prosperity  as  this.  A 
somewhat  sounder  thesis  would  be  that  we  are  prospering 
precisely  because  our  ideals  are  not  materialistic,  that  all 
these  things  are  being  added  unto  us  because  we  are  seek- 
ing first  the  sound  principles  of  justice  and  the  sound  ideals 
of  individual  behavior  which  are  of  the  very  essence  of 
the  Kingdom  of  God,  and  that  no  nation  could  help  pros- 
pering if  it  pursued  these  principles  and  ideals  whole- 
heartedly. 

HANDICAPS  REMOVED 

Whatever  our  purposes  as  individuals  may  be,  one  of 
our  great  national  purposes  has  been  to  give  every  man  a 
fair  chance,  to  free  him  from  all  handicaps,  and  to  provide 
for  everyone  an  open  road  to  talent.  This  in  itself  results 
in  a  great  release  of  human  energy.  When  "the  powers 
that  be"  serve  notice  upon  every  individual  that  his  success 
in  any  field  of  useful  endeavor  is  limited  only  by  his  own 
ability,  industry,  and  wisdom,  that  if  he  possesses  these 
three  qualities  in  high  degree  and  exercises  them  strenu- 
ously, whatever  his  origin  or  antecedents,  he  may  rise  to 
the  highest  positions  in  government,  business,  or  social 
life,  and  that  he  may  fall  to  the  lowest  depths  if  he  wastes 
these  talents — this  in  itself  is  the  most  powerful  system  of 
motivation  the  world  has  ever  discovered.  It  makes 
kinetic  the  latent  energy  of  the  people  and  directs  that 
energy  into  productive  channels.  With  our  democratic 
ideals  we  have  gone  a  little  further  than  any  other  country 
has  yet  gone  in  this  direction,  and  that  is  one  of  the  power- 
ful factors  in  the  creation  of  our  amazing  prosperity. 


"SOMEHOW  GOOD"  93 

Not  only  have  we  succeeded  better  than  other  countries 
in  removing  political  and  social  handicaps  from  individual 
effort;  we  have  done  something  rather  positive  in  provid- 
ing opportunities  for  self-development  in  the  form  of  a 
system  of  popular  and  universal  education.  We  have  not 
done  much  at  public  expense  to  enable  people  to  live  with- 
out work.  There  is  this  important  difference  between  an 
educational  system  and  a  system  of  unemployment  doles 
or  soup  houses :  You  cannot  profit  by  an  educational  sys- 
tem unless  you  work  hard,  but  soup  houses  are  a  means 
whereby  you  can  profit  without  working  at  all.  The  one 
stimulates  and  releases  human  energy;  the  other  permits 
it  to  remain  latent  and  unproductive.  In  this  respect  they 
are  at  opposite  poles.  Our  general  policy  is  designed  to 
stimulate  productive  action,  to  appeal  to  the  spirit  of 
strenuosity  rather  than  to  appeal  to  the  desire  for  sensual 
indulgence.  Ours  is  a  spiritual  appeal  rather  than  a 
materialistic  appeal. 

By  placing  within  the  reach  of  everyone  who  grows  up 
in  this  country  opportunities  for  self-discipline  and  self- 
development,  we  have  tended  to  increase  the  productive 
power  of  each  individual,  to  make  him  more  energetic, 
and  to  direct  his  energy  into  serviceable  channels. 
When  an  individual,  for  any  reason,  remains  In  or  crowds 
into  an  occupation  that  Is  already  overmanned,  he  Is  not 
worth  much  to  the  country.  Anything  which  enables  him 
to  avoid  an  occupation  where  the  individual  is  not  worth 
much  and  to  enter  an  occupation  where  he  is  worth  more 
adds  not  only  to  his  prosperity  but  makes  him  a  more  pro- 
ductive citizen,  and  he  therefore  adds  more  to  the  pros- 


94  THIS  ECONOMIC  WORLD 

perity  of  the  whole  nation  while  achieving  a  greater  pros- 
perity for  himself. 

PRODUCTIVE  ACHIEVEMENT  APPROVED 

More  important  even  than  freedom  in  combination 
with  opportunities  for  self-development  is  that  ideal 
which,  though  not  universal,  is  the  dominant  ideal  in 
American  life,  namely,  that  productive  achievement  is 
more  desirable  than  passive  consumption.  If  our  ideals 
were  really  materialistic,  we  should  care  more  for  a  full 
belly  or  luxurious  consumption  than  for  opportunities  for 
strenuous  activity  or  productive  achievement.  A  people 
whose  ideals  are  of  the  former  sort  can  never  enjoy  a 
prosperity  equal  to  that  of  those  whose  ideals  are  of  the 
latter  sort.  In  other  words,  they  who  follow  the  pig- 
trough  philosophy  of  life  can  never  enjoy  the  prosperity 
of  those  who  follow  the  work-bench  philosophy  of  life. 
Any  population  in  which  the  pig-trough  philosophy  of  life 
dominates  will  possess  the  manners  and  morals  of  the  pig 
trough.  Any  population  which  is  dominated  by  the  work- 
bench philosophy  of  life  will  have  a  superior  system  of 
morals  and  manners.  By  seeking  first  the  release  of 
human  energy  and  by  directing  that  energy  into  service- 
able channels,  all  desirable  material  goods  come  as  a  mat- 
ter of  course. 

From  this  point  of  view,  even  the  active  criminal  is 
superior  to  the  passive  glutton;  his  life  is  at  least  a  life  of 
achievement  and  not  a  life  of  passive  registration  of 
pleasurable  sensations,  though  of  course  it  need  not  be 


"SOMEHOW  GOOD"  95 

said  that  constructive  achievement  is  vastly  to  be  preferred 
to  the  destructive  achievement  of  the  criminal.  Even  in 
his  case,  however,  we  have  achieved  the  release  of  human 
energy.  It  remains  to  redirect  that  energy  out  of  harm- 
ful and  into  serviceable  channels.  It  is  of  the  utmost 
importance  that  we  should  redirect  the  strenuosity  of  the 
criminal  and  turn  it  into  productive  channels,  but  we  may 
at  least  thank  our  stars  that  our  people  are  more  inclined 
to  turn  criminal  than  to  retire  from  business  and  "enjoy 
life,"  as  some  of  our  foreign  critics  think  the  American 
people  ought  to  do. 

GREAT  BECAUSE  USEFUL 

The  redirection  of  human  energy  into  serviceable  chan- 
nels is  of  equal  importance  with  its  release.  The  greatest 
of  all  teachers  laid  down  the  simple  rule,  "He  that  would 
be  great  among  you,  let  him  be  your  servant."  Like  every 
great  and  simple  rule,  this  Is  constantly  perverted.  Some 
have  interpreted  it  to  mean  that  the  desire  for  greatness 
was  to  be  penalized  by  inflicting  servitude  as  a  punish- 
ment. A  much  more  constructive  interpretation  is  some- 
thing like  this:  He  who  has  an  ambition  to  be  great  or 
successful  in  any  field  of  human  endeavor  is  not  to  be  re- 
pressed but  encouraged,  but  the  condition  of  his  success 
must  be  clearly  stated;  he  must  earn  his  greatness  or  suc- 
cess by  doing  something  useful,  which  Is  to  be  a  servant. 
I  submit,  without  fear  of  successful  contradiction,  that  any 
society  that  can  make  this  rule  and  get  it  generally 
adopted  will  necessarily  be  prosperous.    Let  it  approve  as 


96  THIS  ECONOMIC  WORLD 

heartily  as  did  the  Founder  of  Christianity  the  desire  for 
greatness  or  success.  Let  it  encourage  everyone  to  try  to 
be  as  successful  as  he  can,  but  let  it  lay  down  the  one 
simple  condition  that  he  must  earn  his  success  by  doing 
something  useful.  Then  the  more  intense  the  desire  for 
success  becomes,  the  more  intensely  will  every  individual 
strive  to  do  useful  things.  When  everybody  is  strenu-. 
ously  and  intelligently  trying  to  do  useful  things,  every- 
body  is  prosperous.  When  everybody  goes  about  doing 
good,  a  vast  amount  of  good  is  done.  But  doing  good 
means  doing  a  great  variety  of  things,  not  only  teaching 
and  healing,  but  growing  corn  and  hogs,  making  shoes  and 
pictures,  and  so  on.  That  is  as  simple  and  incontro- 
vertible as  the  multiplication  table.  When  every  ounce 
of  human  energy  is  devoted  to  something  useful,  there 
will  be  a  vast  amount  of  usefulness,  or  a  vast  quantity  of 
useful  things.  Here  we  have  the  very  cornerstone  of  all 
national  prosperity.  It  will  take  a  person  of  a  good  deal 
of  nerve  to  assert  that  He  who  laid  down  this  simple  rule 
was  encouraging  the  pursuit  of  material  aims.  He  was 
laying  the  cornerstone  of  the  Kingdom  of  God,  and  in  the 
statement  that  if  this  is  earnestly  sought,  all  other  things 
come  as  a  matter  of  course,  he  was  stating  what  comes 
very  close  to  being  a  self-evident  truth. 

But  in  order  to  do  good  it  is  not  necessary  that  one 
should  be  moved  exclusively  by  benevolent  motives.  It  is 
only  necessary  that  he  should  be  willing  to  give  good 
service  or  good  measure  in  return  for  what  he  gets.  A 
certain  amount  of  preference  for  self  and  those  who  are 
near  to  one's  self  is  quite  compatible  with  this  standard. 


"SOMEHOW  GOOD"  97 

This  Is  recognized  in  the  rule  already  quoted:  "He  that 
would  be  great  among  you,  let  him  be  your  servant."  The 
desire  to  be  great  or  successful  is  a  somewhat  self-centered 
desire;  it  implies  a  reasonable  amount  of  ambition,  of 
striving  for  personal  success.  It  does  not  insist  upon  the 
desire  to  serve  to  the  exclusion  of  all  other  desires.  It 
merely  requires  the  willingness  to  serve  as  the  condition 
of  satisfying  the  desire  for  success,  the  willingness  to  stake 
one's  success  upon  one's  ability  to  contribute  to  the  success 
of  others.  Wherever  this  general  willingness  exists,  you 
have  all  the  conditions  for  a  great  and  successful  society. 
Where  it  does  not  exist,  there  is  only  failure. 

Moreover,  this  rule  embodies  the  only  sound  ideal  of 
justice  that  has  ever  been  enunciated.  Some  mistake 
charity  for  justice,  and  this  leads  to  much  muddy  think- 
ing. Charity  has  its  place  in  the  world;  so  has  justice,  but 
they  are  not  to  be  confused.  If  we  are  thinking  of  jus- 
tice, we  shall  find  that  this  rule  sets  forth  the  highest  ideal 
that  has  ever  been  put  into  words. 

It  is  the  gospel  of  strength.  It  appeals  to  the  best  that 
is  in  people.  There  is  nothing  in  it  of  the  cult  of  incom- 
petence and  self-pity.  It  appeals  to  all  the  constructive 
elements  in  human  nature  and  not  to  the  weak  or  vicious 
elements.  It  makes  human  nature  dynamic,  which  is  the 
highest  form  of  spirituality.  That  type  of  religion  which 
teaches  a  passive  indulgence  in  mere  religious  feeling  is  at 
best  only  a  form  of  spiritual  self-indulgence  which  is  not 
much  better  than  physical  self-indulgence.  To  enjoy  re- 
ligion without  regard  to  action  or  achievement  is  little 
better  than  merely  to  enjoy  anything  else  for  its  own  sake, 


98  THIS  ECONOMIC  WORLD 

without  regard  to  its  function  in  life,  which  is  perversion; 
it  is  a  kind  of  spiritual  masturbation. 

WEALTH   NOT   CONSUMED  IN   LEISURE 

That  our  ideals  in  this  country  are  not  materialistic  is 
evidenced  by  a  number  of  other  facts;  among  these  may 
be  mentioned  the  fact  that  our  great  men  do  not  retire 
from  activity  in  order  to  consume  what  they  have  pre- 
viously accumulated.  That  was  the  mistake  made  by  a 
certain  man  who,  having  built  his  barns  larger  and  filled 
them,  decided  to  retire  from  business  and  take  his  ease — 
to  "eat,  drink  and  be  merry"  for  the  rest  of  his  life. 
That,  it  will  be  remembered,  was  where  he  lost  his  soul. 

Suppose,  for  example,  that  every  really  great  surgeon 
whose  earnings  were  very  large  should  retire  from  active 
work  as  soon  as  he  was  financially  able  to  do  so.  The 
greater  the  surgeon,  the  earlier  he  would  be  able  to  retire 
from  business.  The  earlier  he  retired,  the  greater  would 
be  the  social  loss  because  the  greater  number  of  his  really 
productive  years  would  go  to  waste.  Only  the  inferior 
surgeons  who  could  never  accumulate  enough  on  which  to 
retire  would  remain  active,  and  the  world  would  have 
much  poorer  surgery  than  it  now  has.  Or  suppose  that 
every  great  captain  of  industry  should  retire  from  business 
as  soon  as  he  were  financially  able  to  do  so.  The  greater 
his  ability,  the  sooner  he  would  retire.  This  would  leave 
industry  under  the  management  of  second-  and  third-rate 
men  who  would  be  unable  to  retire.  When  industry  Is 
under  the  management  of  second-  and  third-rate  men,  we 


"SOMEHOW  GOOD"  99 

shall  have  only  second-  and  third-rate  industries.  Second- 
and  third-rate  industries  are  industries  that  are  poorly 
managed,  in  which  the  product  per  worker  Is  low,  and 
when  the  product  per  worker  is  low,  wages  must  of  physi- 
cal necessity  also  be  low.  It  is  only  where  we  have  first- 
rate  industries,  managed  by  first-rate  men,  that  the 
product  per  worker  is  high  enough  to  make  it  possible  to 
pay  high  wages.  Show  me  any  country  in  which  it  is  the 
general  practice  for  every  capable  industrial  leader  to  re- 
tire as  soon  as  he  can,  and  I  will,  without  the  slightest 
doubt  or  hesitation,  show  you  a  country  that  does  not 
now  and  never  can  pay  high  wages  to  its  workers.  That 
is  as  simple  and  indubitable  as  the  multiplication  table. 
Because  in  this  country  we  have,  to  some  considerable 
degree,  cherished  the  ideal  of  action  rather  than  of  con- 
sumption, we  have  managed  to  keep  first-rate  men  active 
in  various  lines  of  business  as  well  as  in  the  learned  pro- 
fessions, and  this,  more  than  anything  else,  explains  why 
we  are  able  to  pay  the  high  wages  we  do. 

ACCUMULATED  WEALTH   EXPENDED  ON  PRODUCTION 

Again,  as  to  our  supposed  greed  for  dollars:  that  is 
also  a  mistake,  as  evidenced  by  the  attitude  of  the  typical 
American  toward  his  dollars  after  he  has  accumulated 
them.  He  shows  how  little  he  cares  for  them  either  by 
wasting  them  (if  he  is  a  waster)  or  by  putting  them  to 
some  constructive  work,  if  he  is  of  a  constructive  mind. 
I  grant  that  we  are  poor  consumers.  We  have  never 
devoted  much  attention  to  the  art  of  graceful  consumption 


100  THIS  ECONOMIC  WORLD 

or  elegant  leisure,  and  it  is  to  be  hoped  that  we  never 
shall.  When  rich  men  turn  their  chief  attention  to  such 
things  rather  than  to  constructive  enterprise,  constructive 
enterprises  lag,  the  product  per  worker  falls,  and  wages 
must  necessarily  fall.  When  capable  men  forget  about 
consumption,  or  regard  it  mainly  as  a  means  of  maintain- 
ing and  renewing  their  energies,  devoting  these  energies 
to  constructive  work,  industry  advances  rapidly.  Legiti- 
mate or  necessary  wants  are  abundantly  supplied;  even 
simple  luxuries  abound  for  the  masses  rather  than  for  the 
few  that  are  rich. 

One  of  the  most  striking  things  about  our  rich  men  in 
this  country,  especially  those  who  have  grown  rich  in  our 
generation,  Is  that  most  of  them  have  grown  rich  not  by 
catering  to  the  nobility,  not  by  government  concessions, 
not  by  monopolizing  the  necessaries  of  life,  but  by  pro- 
ducing cheap  luxuries  for  masses  of  people.  Conspicuous 
fortunes  are  made  in  chewing  gum,  soft  drinks,  safety 
razors,  moderate-priced  cameras,  moving  pictures,  and 
low-priced  automobiles.  This  is  not  because  our  great 
enterprisers  have  been  philanthropically  minded,  but  be- 
cause, under  the  normal  working  of  our  institutions  and 
our  ideals,  the  great  reservoirs  of  purchasing  power  are  in 
the  pockets  of  the  masses  rather  than  in  those  of  the  rich 
few.  This  has  proved  to  be  a  greater  field  for  produc- 
tive enterprise — to  try  to  tap  the  great  reservoir  of  pur- 
chasing power  that  is  found  in  the  pockets  of  the  masses 
— than  to  cater  to  the  rich  and  fastidious. 

This  is  a  principle  that  grows  by  what  it  feeds  on.  The 
more  we  cherish  the  ideal  of  a  fair  chance  for  all,  and  the 


"SOMEHOW  GOOD"  loi 

more  strenuous  our  capable  men  become,  the  more  money 
there  will  be  In  the  pockets  of  the  masses.  The  more 
money  there  is  in  the  pockets  of  the  masses,  the  more 
this,  in  turn,  stimulates  capable  men  to  further  activity  in 
the  same  direction.  It  is  a  sort  of  circle,  but  by  no  means 
a  vicious  circle.  It  promises  better  and  better  things  for 
the  future. 

If  the  individual  who  has  accumulated  a  fund  of  wealth 
is  not  a  waster,  he  Is  pretty  certain  to  reinvest  it  rather 
than  to  sit  down  and  consume  it.  He  may  reinvest  it  in 
his  own  business,  if  he  concludes  that  that  business  will 
stand  expansion,  or  in  some  other  business,  if  he  thinks 
that  will  stand  expansion  still  more,  but  in  a  great  number 
of  cases  also  he  reinvests  it  In  opportunities  for  self- 
development  on  the  part  of  the  masses  of  the  people. 
Our  rich  men  are  not  much  given  to  that  form  of  philan- 
thropy which  provides  people  with  the  means  of  living 
without  work.  They  are  more  given  to  providing  oppor- 
tunities for  self-development  which  require  the  individual 
to  work  hard  if  he  expects  to  get  any  benefit  from  them. 
His  appeal  is  to  the  free  spirit  of  man  that  desires  action 
rather  than  to  the  animal  nature  that  desires  a  full  belly 
and  repose.  That  Is  why  they  endow  libraries  and  educa- 
tional institutions  rather  than  almshouses. 

ENCOURAGEMENT  OF  SOBRIETY 

There  has  been  a  more  active  and  prolonged  promotion 
of  sobriety  in  this  country  than  in  any  other  country  in  the 
north  temperate  zone.     We  may  disagree  as  to  the  wis- 


102  THIS  ECONOMIC  WORLD 

dom  of  this  or  that  method  of  promoting  sobriety,  but 
there  is  very  little  difference  of  opinion  as  to  the  effect  of 
drunkenness  on  individual  and  national  prosperity.  In 
our  interlocking  civilization,  with  its  minute  specializa- 
tion, we  are  becoming  more  and  more  dependent  upon  one 
another.  This  raises  dependability  to  the  rank  of  one  of 
the  primary  virtues.  Whatever  destroys  dependability 
destroys  one  of  the  very  foundations  of  national  pros- 
perity. 

Again,  there  cannot  be  much  difference  of  opinion  as  to 
the  efforts  that  have  been  made  in  this  country,  from  the 
days  of  Benjamin  Rush  and  Benjamin  Franklin  down  to 
the  days  of  Andrew  Volstead  and  Wayne  B.  Wheeler,  to 
fight  drunkenness.  The  only  possible  disagreement  Is  as 
to  the  wisdom  of  the  methods  used,  or  the  success  at- 
tained. However,  I  will  undertake  to  show  the  doubter 
more  drunken  men  and  women  In  one  hour  at  certain 
spots  In  London,  Edinburgh,  or  Glasgow  than  he  can 
show  me  in  an  equal  period  In  any  city  In  the  United 
States. 

Now  the  pursuit  of  sobriety  can  hardly  be  called  a  pur- 
suit of  materialistic  gains,  nor  can  devotion  to  alcoholic 
drinks  be  called  devotion  to  spiritual  ideals.  I,  at  least, 
do  not  want  any  person  whose  body  smells  of  the  evi- 
dences of  animal  indulgence  to  preach  to  me  about  devo- 
tion to  the  higher  things  of  life. 

The  fight  against  alcoholism  Is  the  only  great  reform 
of  the  present  day  that  is  carried  on  by  people  who  have 
nothing  personal  to  gain  from  it.  The  only  people  who 
should,  from  their  own  personal  standpoint,  be  interested 


"SOMEHOW  GOOD"  103 

in  It,  that  is,  those  who  are  addicted  to  drink,  are  almost 
unanimously  fighting  on  the  side  of  drink  rather  than 
against  it.  Nothing  except  a  general  interest  in  the  public 
good  is  adequately  motivating  the  fight  against  drink. 
This  is  not  exactly  a  materialistic  end  or  aim. 

THE  GOAL  NOT  YET  REACHED 

Now  I  do  not  mean  to  imply  that  we  have  gone  a  great 
way  in  any  of  these  directions.  There  is  a  long  road 
ahead  of  us  yet  before  we  reach  the  goal  of  economic 
progress.  The  point  is  that  we  have  gone  a  little  way — 
perhaps  a  very  little  way — further  in  these  directions  than 
other  countries.  But  a  very  little  difference  of  this  kind 
makes  a  vast  difference  in  the  economic  results  achieved. 
The  possibilities  ahead  are  almost  infinite  if  we  remember 
that  prosperity,  like  happiness,  comes  not  from  seeking  it 
directly,  but  comes  as  a  by-product  of  the  pursuit  of  sound 
ideals. 

Of  course,  the  principles  of  economics  are  universal. 
No  country  can  monopolize  any  of  them.  But  while  this 
is  true,  only  a  fool  would  imagine  that  one  country  could 
not  lead  others  in  the  application  of  these  principles  to  its 
own  problems.  Whenever  any  other  country  begins  to 
lead  us  in  the  pursuit  of  sound  ideals,  it  will  also  lead  us 
in  prosperity,  but  its  increasing  prosperity  will  not  im- 
poverish us.  It  will  tend  to  enrich  us,  if  we  continue  to 
cultivate  the  productive  virtues  among  ourselves.  It 
could  impoverish  us  only  if  we  developed  a  rancorous 
spirit,  instead  of  being  stimulated  by  its  example,  and 


104  THIS  ECONOMIC  WORLD 

began  to  He  down  on  the  job  and  expect  the  other  country 
to  divide  its  prosperity  with  us. 

HOW  LONG  WILL  PROSPERITY  LAST? 

How  long  will  our  amazing  prosperity  last?  To  some 
it  seems  so  unexplainable  as  to  be  abnormal.  No  one  can 
say  exactly  how  long  it  will  last.  It  is  safe  to  say,  how- 
ever, that  it  will  last  as  long  as  we  succeed  in  releasing 
human  energy  and  applying  it  to  useful  purposes,  as  long 
as  men  of  high  capacity  in  large  numbers  concentrate  their 
energy  on  industrial  problems,  refusing  to  be  bribed  into 
inaction  by  their  own  riches,  preferring  rather  to  reinvest 
their  accumulating  riches  in  productive  industries,  as  long 
as  we  continue  to  thin  out  the  workers  In  the  overcrowded 
occupations  by  enabling  them  to  enter  those  in  which 
workers  are  scarce  and  much  needed,  as  long  as  we  pre- 
vent the  congestion  of  manual  trades  by  wholesale  impor- 
tations of  cheap  labor,  and  as  long  as  we  continue  to 
reduce  the  sum  total  of  incapacity  from  drunkenness. 

THE  PRINCIPLES  OF  SOCIAL  JUSTICE 

Let  everyone  prosper  In  exact  proportion  as  he 
contributes  to  the  prosperity  of  others. 

Let  everyone  be  given  the  best  possible  oppor- 
tunity to  acquire  the  ability  to  contribute  to  the  pros- 
perity of  others. 

These  two  principles  taken  together  give  us  a  working 
program  of  social  justice  that  will  insure  the  prosperity  of 


"SOMEHOW  GOOD"  105 

any  country  and  the  wide  diffusion  of  that  prosperity. 
The  country  that  succeeds  in  realizing  this  concept  of  the 
Kingdom  of  God  will  find  all  these  other  things  enumer- 
ated by  Mr.  White  in  the  paragraph  quoted  at  the  begin- 
ning of  this  chapter — "needs,  comforts,  luxuries,  houses, 
clothes,  food,  fuel,  motor  cars,  radio  sets,  telephones, 
tooth  paste,  floor  coverings,  electric  household  machines, 
labor-saving  farm  tools,  cement  highways,  tall  buildings, 
public  halls,  dry  goods,  and  fancy  groceries" — added 
unto  it.  If,  forgetting  these  great  principles  of  justice,  it 
seeks  these  material  things  first,  it  will  not  succeed  in 
getting  them. 

It  ought  to  be  clear  that  the  pursuit  of  these  great  prin- 
ciples of  justice  is  not  the  pursuit  of  a  materialistic  ideal. 
If  material  things  come  as  a  matter  of  course,  it  is  not 
necessary  that  we  forget  the  great  ideals  we  were  seeking 
and  focus  our  attention  on  some  of  the  material  results. 
I  submit  that  this  is  a  sufficient  defense  against  the  charge 
that  this  economic  world  of  ours  is  based  on  materialism. 

If  an  individual  wants  material  things,  his  best  chance 
of  getting  them  is  to  fit  himself  into  a  great  society  that  is 
pursuing  these  ideals  of  justice.  Only  in  such  a  society  do 
such  things  abound.  On  the  other  hand,  the  existence  of 
such  a  society  with  its  abundance  of  material  things  does 
not  compel  one  to  care  for  such  things;  in  fact,  it  is  just 
as  easy  to  assume  the  vow  of  poverty  and  live  up  to  it  in 
this  present  so-called  capitalistic  age  as  it  ever  was  in  the 
so-called  ages  of  faith.  It  is  necessary  only  that  he  shall 
regard  his  wealth  only  as  capital — that  is,  tools — rather 
than  as  a  means  of  self-gratification. 


io6  THIS  ECONOMIC  WORLD 

PRODUCTIVE  PHILANTHROPY 

In  the  past,  the  man  who  took  the  vow  of  poverty  was 
supposed  to  dedicate  his  life  to  contemplation  or  to 
philanthropic  service.  Material  wealth  was  thought  to 
be  primarily  a  means  of  self-gratification  or  of  ministering 
to  the  flesh.  To  take  the  vow  of  poverty  then  meant  to 
possess  no  material  wealth. 

The  concept  of  material  wealth  has  broadened  in  recent 
times.  It  is  no  longer  thought  to  be  simply  a  means  of 
self-gratification  except  by  a  few  primitive  minds  who 
have  not  grasped  the  larger  idea.  Wealth  Is  as  truly  a 
means  of  service  as  the  strength  of  one's  muscles  or  the 
capacity  of  one's  intellect.  The  mechanical  inventor  has 
helped  to  make  wealth  into  a  mass  of  tools  rather  than 
into  a  mass  of  consumers'  goods.  One  who  thinks  of  his 
wealth  as  a  collection  of  tools  rather  than  as  a  mass  of 
consumers'  goods  may  as  easily  dedicate  his  wealth  as  his 
mind  or  muscles  to  service.  He  may  assume  the  vow  of 
poverty  and  live  up  to  it  as  rigidly  as  Saint  Francis  of 
AssisI  himself  and  yet  own  millions  of  dollars  worth  of 
tools.  In  other  words,  he  may  be  a  great  capitalist;  for 
capital  Is  tools.  If  he  lives  frugally,  works  hard,  and 
devotes  all  his  powers,  muscular,  mental  and  financial,  to 
service,  he  will  fulfil.  In  the  strictest  sense,  the  vow  of 
poverty. 

In  order  that  one  may  dedicate  his  wealth  to  service.  It 
is  not  necessary  that  he  give  It  away  In  charity.  In  fact, 
giving  it  away  is  probably  one  of  the  poorest  ways  of 
dedicating  wealth  to  service.      It  is  probably  much  better, 


"SOMEHOW  GOOD"  107 

if  one  has  the  necessary  wisdom,  to  invest  one's  wealth  in 
productive  industries  than  to  give  it  in  charity;  but  it 
requires  unusual  wisdom  and  skill  to  invest  wealth  pro- 
ductively. If  you  have  $1,000  which  you  wish  to  give  to 
the  poor,  it  is  very  easy  to  give  it  away  and  expect  nothing 
in  return.  If  you  do  so,  that  is  the  end  of  the  $1,000  so 
far  as  you  are  concerned.  If,  instead  of  giving  it  to  the 
poor  in  charity  you  are  wise  enough  to  hire  them  to  pro- 
duce something,  the  $1,000  will  do  them  just  as  much 
good  when  you  pay  it  to  them  in  wages  as  it  would  if  you 
gave  it  to  them  as  charity.  If  you  are  wise  and  skillful 
in  hiring  them,  you  will  have  the  advantage  of  having  an- 
other $1,000  when  you  sell  the  product  to  replace  the 
$1,000  you  paid  out.  This  puts  into  your  hands  the 
power  to  turn  your  $1,000  over  and  over  again  and  to 
give  continuous  employment,  which  is  very  much  better 
than  giving  a  lump  sum  and  letting  that  be  the  end  of  it. 
However,  it  takes  a  very  capable  man  to  do  this. 

It  takes  a  still  more  capable  man  to  direct  his  laborers 
so  efficiently  that  for  every  $1,000  he  pays  them  as  wages 
he  gets  $2,000  from  the  sale  of  the  product.  Such  a  man 
is  even  more  of  a  benefactor  than  the  other  because  he 
now  has  $2,000  with  which  he  can  pay  wages,  enlarge  his 
plant,  or  increase  his  scale  of  production.  Having  taken 
the  vow  of  poverty,  he  still  consumes  frugally  and  works 
hard;  but  he  accumulates  more  and  more  tools  with  which 
to  enlarge  his  power  of  service. 

The  more  such  men  there  are  in  any  country,  the  more 
large  and  efficient  factories  there  will  be,  the  more  em- 
ployment there  will  be   for  labor,   and  the  higher  the 


io8  THIS  ECONOMIC  WORLD 

wages,  the  less  the  unemployment  and  poverty.  In  fact, 
this  is  the  only  real  and  fundamental  cure  for  unemploy- 
ment and  poverty  that  is  known  to  the  modern  world. 
One  man  who  knows  actually  how  to  employ  laborers  and 
pay  them  wages  does  more  for  labor  than  10,000  talkers 
about  the  problem  of  unemployment.  The  principal 
reason  why  we  have  so  little  unemployment  and  poverty 
in  the  United  States  Is  that  we  have  so  many  men  of  the 
former  kind.  The  principal  reason  why  they  have  so 
much  unemployment  and  poverty  in  old  and  aristocratic 
countries  is  that  they  have  so  few  men  of  that  kind.  They 
have  too  many  talkers  and  not  enough  doers. 

IS  THE   PRESENT  SYSTEM  SOMEHOW  GOOD? 

Is  our  present  economic  system,  then,  "somehow  good"? 
Its  critics  show  that  it  has  not  attained  perfection.  It 
still  imposes  the  penalty  of  labor.  The  institution  of 
property  Is  still  abused.  Competition  still  calls  for  skill 
and  effort.  Profit  is  still  the  aim  and  reward  of  enter- 
prise. 

But  the  good  of  an  economic  system  is  determined  by 
facts,  not  by  theories.  The  economic  welfare  of  the 
United  States  Is  an  object  lesson  of  facts.  It  shows  that 
labor  need  not  be  degrading,  that  property  is  not  neces- 
sarily selfish,  that  competition  may  be  cooperative  in 
achieving  widespread  well-being,  that  profit  as  the  reward 
of  enterprise  may  be  turned  to  desirable  social  uses. 

The  great  principles  of  social  justice  which  here  deter- 
mine the  successful  use  of  our  economic  system  also  deter- 


"SOMEHOW  GOOD"  109 

mine  its  promise  for  the  future.  For  all  that  it  will 
forever  fall  short  of  perfection,  it  has  always  possibilities 
of  progress.  And  practically,  a  system  that  has  been 
shown  to  have  such  possibilities  promises  more  for  the 
future  than  any  that  is  mainly  theoretical  and  untried. 

At  the  very  least,  a  certain  minimum  of  material 
things,  that  is,  a  minimum  of  fuel,  of  food,  clothing  and 
shelter,  is  not  to  be  despised  if  we  persist  in  living  in  a 
harsh  climate.  There  is  something  to  be  said  for  an 
economic  system  that  will  ensure  this  minimum  for  all 
classes  of  people. 


Ill 


THE  PRESENT  STATE  OF  LIBERALISM 

ECONOMIC  principles,  to  the  extent  that  they  are 
discovered  and  understood,  are  expressed  in  eco- 
nomic institutions  which,  for  the  mode  of  their  expression, 
are  associated  closely  with  social  and  political  institutions. 
To  forecast  the  course  of  economic  progress  it  i«  there- 
fore important  to  know  the  tendency  of  political  and 
social  thought,  and  particularly  whether  that  tendency  is 
chiefly  guided  by  the  principles  of  liberalism  or  those  of 
coercive  authority.  What,  then,  is  the  present  standing 
of  liberalism  in  the  world,  and  what  is  its  importance  to 
economic  progress? 

THE  RECENT  HISTORY  OF  LIBERALISM 

Forty  years  ago,  that  is,  in  the  eighties  of  the  nine- 
teenth century,  liberalism  seemed  to  be  in  the  saddle  in 
the  western  world.  In  English  politics,  the  brains  of  the 
Conservative  Party  had  been  sterilized  by  putting  Dis- 
raeli in  pickle  in  the  House  of  Lords.  The  party  of 
Gladstone  had  absorbed  most  of  the  younger  intellectuals, 
and  it  looked  as  if  the  enlightened  liberalism  of  John 
Stuart  Mill  was  about  to  crystallize  into  a  permanent 
national  policy.     In  France,  political  liberalism,  never  so 

no 


THE  PRESENT  STATE  OF  LIBERALISM       in 

strong  as  in  England,  was  a  little  delayed.  It  had  been 
overwhelmed  by  the  militancy  of  the  Second  Empire  and 
the  uproar  of  the  stormy  period  of  recovery;  but  after 
the  defeat  of  Boulanger  in  1889  and  the  general  accep- 
tance of  the  republic  by  the  Church  in  1892,  it  became 
the  dominant  note  in  French  politics.  Its  champions  were 
the  moderate  republicans  who  were  opposed  by  mon- 
archical authoritarians  on  the  one  side  and  radical  author- 
itarians on  the  other,  both  extremes  being  willing  to  use 
the  coercive  power  of  government  to  achieve  results  which 
they  prized  more  than  liberty  itself.  Further  east,  ex- 
cept in  Switzerland,  liberalism  never  dominated  either 
the  thinking  or  the  politics  of  any  country.  Coercion,  or 
the  exercise  of  authority,  has  been  the  chief  reliance  of 
all  parties  in  that  part  of  the  world.  Faith  in  the  con- 
structive power  of  the  free  spirit  of  man  has  never  been 
noticeable   in  the  policies  of  eastern   governments. 

In  the  United  States,  liberalism  suffered  the  same  re- 
lapse during  and  after  the  Civil  War  as  in  France  during 
and  after  the  war  with  Prussia.  The  reconstruction 
period  was  especially  marred  by  the  spirit  of  coercion. 
The  power  of  government  was  evoked  to  accomplish 
things  which,  to  a  liberal  mind,  can  be  accomplished  only 
by  the  slow  process  of  education  and  the  maturing  of 
sound  opinion  and  wholesome  sentiment.  The  broad- 
minded  liberalism  of  President  Hayes  was  repudiated  in 
favor  of  angry  coercion  by  his  own  party,  though  he  lived 
to  see  that  party  adopt  every  one  of  the  policies  which 
it  repudiated  during  his  administration.  Liberal  coun- 
cils continued  to  be  drowned  out  by  appeals  to  sectional 


112  THIS  ECONOMIC  WORLD 

feeling  until  the  election  of  President  Cleveland  convinced 
the  politicians  that  the  Civil  War  was  really  a  dead  is- 
sue. It  looked  for  a  time  as  if  the  American  form  of 
political  liberalism,  commonly  known  as  Jeffersonian 
Democracy,  had  again  come  into  its  own.  Liberalism,  In 
the  Jeffersonian  sense,  meant  more  than  free  trade,  pro- 
tectionism being  only  one  form,  and  by  no  means  the 
most  vicious  form,  of  authoritarianism.  Liberalism 
meant  a  general  reliance  upon  men  to  look  after  them- 
selves and  upon  voluntary  agreement  among  free  citizens 
wherever  the  joint  action  of  large  numbers  of  men  was 
necessary  to  get  a  thing  done. 

From  the  days  of  Gladstone  until  the  present  moment, 
genuine  liberalism  in  English  politics  has  gradually  dwin- 
dled. At  the  present  time,  that  unhappy  country  is  di- 
vided between  conservative  authoritarians  on  the  one 
side  and  radical  authoritarians  on  the  other.  Both  sides 
are  maneuvering  to  gain  control  of  the  coercive  power 
of  the  state,  intending  to  use  it,  not  for  the  purpose  of 
increasing  the  freedom  of  the  individual,  but  to  compel 
him  to  do  what  the  authoritarian,  radical  or  conservative 
as  the  case  may  be,  wants  him  to  do.  Neither  party 
seems  to  have  much  faith  in  the  ability  of  the  individual 
to  act  wisely  in  the  ordinary  affairs  of  life,  but  both  ap- 
pear to  have  a  sufficiency  of  faith  in  their  own  ability  to 
act  wisely  in  wielding  government  authority.  In  short, 
liberalism  seems  to  be  dead  In  English  politics. 

In  France,  likewise,  the  undoubted  drift  Is  toward 
authoritarianism.  No  party  of  any  importance  is  com- 
mitted to  a  policy  of  reducing  the  sum  total  of  coercion 


THE  PRESENT  STATE  OF  LIBERALISM       113 

over  the  individual.  No  party  seems  to  believe  that  men 
are  quite  as  wise  and  capable  in  managing  their  own  affairs 
as  they  are  in  managing  the  affairs  of  other  people 
through  the  agency  of  government.  The  general  drift 
of  opinion,  among  all  parties,  seems  to  be  toward  the 
conclusion  that  politics  is  an  alembic  wherein  the  cupidity 
and  stupidity  of  masses  of  men  are  distilled  into  gener- 
osity, wisdom,  and  virtue.  On  what  other  theory  could 
one  maintain  that  men  who  cannot  look  after  themselves 
when  left  alone  can,  through  the  government  which  they 
themseh^es  control,  look  after  themselves  and  others? 
The  most  extreme  form  of  authoritarians,  namely,  the 
communists  and  the  socialists,  have  an  even  stronger  hold 
in  France  than  in  England.  Among  the  more  conserva- 
tive authoritarians,  protectionism  and  other  forms  of 
government  interference  seem  to  be  assumed  as  a  matter 
of  course. 

In  the  United  States,  the  party  of  Jefferson  has  for- 
gotten every  Jeffersonian  principle  except  free  trade. 
Even  its  ardor  for  that  policy  is  suddenly  cooled  whenever 
it  touches  an  industry  in  which  Democratic  states  are  in- 
terested. In  other  respects  the  Democratic  Party  is  even 
more  authoritarian  than  the  party  of  protection.  Its 
legislative  program  involves  even  more  interference  with 
individual  freedom  than  does  that  of  the  opposing  party. 
By  insisting,  in  the  name  of  Jeffersonian  Democracy,  upon 
freedom  of  trade  and  then  going  in  for  a  wholesale  pro- 
gram of  government  regulation,  it  is  simply  engaging  in 
the  difficult  enterprise  of  straining  at  a  gnat  and  swallow- 
ing a  camel.    As  for  the  Republican  Party,  the  most  that 


114  THIS  ECONOMIC  WORLD 

can  be  said  for  it  from  the  standpoint  of  liberalism  is 
that  it  has  never  pretended  to  be  a  liberal  party.  It  has 
frankly  been  the  party  of  protectionism  and  the  "big 
stick." 

The  more  extreme  forms  of  authoritarianism,  such  as 
socialism  and  communism,  have  always  had  their  parties, 
but  they  have  never  polled  such  strength  here  as  in  France 
or  even  in  England.  Socialism  and  communism  have 
never  polled  more  than  a  negligible  fraction  even  of  the 
labor  vote,  while  the  less  extreme  forms  of  radicalism, 
as  represented  by  the  late  Mr.  La  Follette,  have  never, 
since  the  obscuration  of  Mr.  Bryan,  amounted  to  more 
than  an  interesting  political  side  show.  No  such  discon- 
certing recrudescence  of  authoritarianism  as  the  short- 
lived triumph  of  the  British  Labor  Party  has  yet  threat- 
ened the  complete  annihilation  of  liberalism  in  this 
country. 

Few  of  our  people  realize  how  great  was  the  danger 
of  a  relapse  Into  extreme  authoritarianism  in  England. 
Some  were  misled  by  the  statements  regarding  the  great 
wealth  of  the  members  of  their  Labor  Cabinet.  It  Is 
doubtful  if  we  In  the  United  States  have  ever  had  a 
cabinet  that  was  possessed  of  as  much  average  or  aggre- 
gate wealth  as  was  the  group  of  men  that  surrounded 
Premier  MacDonald  and  posed  as  leaders  of  a  labor 
party. ^  Moreover,  most  of  it  was  inherited  wealth,  the 
least  defensible  form.  On  the  other  hand,  it  seemed  to 
many  Englishmen  quite   revolutionary  to  have  the  son 


^  See  article  by  Charles  F.  G.  Masterman,  "The  Proletariat  in  Power," 
Atlantic  Monthly,  April,  1924. 


THE  PRESENT  STATE  OF  LIBERALISM       115 

of  a  laboring  man  elevated  to  the  premiership.  If  we 
include  farmers  under  laboring  men,  it  has  been  quite 
the  common  thing  in  this  country  for  the  highest  positions 
in  government  as  well  as  in  business  to  go  to  such  per- 
sons. We  merely  take  it  as  a  matter  of  course,  and  it 
does  not  excite  any  comment.  It  is  not  the  fact  that  a 
man  rose  from  the  ranks,  however,  nor  the  fact  that  he 
has  become  a  man  of  wealth,  that  is  important.  It  is 
the  policy  and  program  for  which  he  stands  that  should 
count.  The  MacDonald  program,  as  announced  in  his 
published  works, ^  was  extremely  authoritarian. 

MACDONALD,  MUSSOLINI,  AND  LENIN 

A  just  estimate  of  the  significance  of  the  rise  of  Mac- 
Donald  can  be  gained  only  by  comparing  him  with  two 
of  his  contemporaries,  Lenin  and  Mussolini.  There  are 
two  bases  on  which  such  a  comparison  may  be  made,  first, 
their  political  methods,  and  second,  their  economic  pol- 
icies. Their  political  methods  are  their  means  of  getting 
power.  Their  economic  policies  are  the  uses  they  made 
or  proposed  to  make  of  their  power  after  they  got  it. 

Few  of  us  distinguish  sharply  enough  between  two 
very  different  things,  namely  the  methods  by  which  a 
leader  gets  power  on  the  one  hand,  and,  on  the  other, 
the  way  he  uses  his  power  after  he  gets  it.  When  com- 
pared on  the  basis  of  the  methods  of  getting  power,  there 
is  not  much  to   choose  between   Lenin   and   Mussolini. 


^  See  J.  Ramsey  MacDonald,  Socialism,  London  and  Edinburgh,  T.  C. 
and  E.  C.  Jack,  1Q07. 


ii6  THIS  ECONOMIC  WORLD 

Both  used  the  method  of  violence,  which  is  wholly  and 
unqualifiedly  bad.  J.  Ramsay  MacDonald  and  the  labor 
party,  however,  came  into  power  in  a  thoroughly  consti- 
tutional manner,  and  no  American  could  criticize  them 
for  that. 

When  compared  on  the  basis  of  the  uses  made  of  the 
power  which  both  obtained  by  equally  unconstitutional 
methods,  Lenin  and  Mussolini  were  at  opposite  poles. 
Lenin  used  his  ill-gotten  power  foolishly  and  destruc- 
tively, plunging  a  naturally  rich  country  into  the  most 
excruciating  poverty  the  modern  world  has  ever  seen. 
Mussolini,  on  the  other  hand,  used  his  equally  ill-gotten 
power  in  a  thoroughly  constructive  and  beneficent  man- 
ner, lifting  a  country  out  of  disorganization,  unemploy- 
ment, and  poverty  into  a  state  of  organization,  employ- 
ment, and  prosperity.  In  spite  of  all  that  can  be  said 
against  his  political  methods,  that  is,  his  methods  of 
getting  power,  his  economic  policies,  that  is,  his  uses  of 
power,  made  Italy  for  a  time  the  one  bright  spot  in 
Europe,  the  one  country  that  was  making  definite  and 
undeniable  progress.  If  his  political  methods  had  been 
as  sound  as  his  economic  policies,  he  would  undoubtedly 
rank  as  the  greatest  statesman  of  his  time. 

It  is  impossible  to  state  what  the  British  Labor  Party 
would  have  done  with  its  power  if  it  had  retained  it,  or 
what  it  will  do  with  that  power  if  it  regains  it,  but,  if 
one  might  judge  by  what  its  leaders  wrote  and  said  be- 
fore they  came  into  power  as  to  what  they  would  do  if 
they  ever  got  power  or  (which  means  the  same  thing) 
what  the  government  would  do,  one  would  have  to  class 


THE  PRESENT  STATE  OF  LIBERALISM       117 

them  with  Lenin  rather  than  with  Mussolini.  With  all 
their  exquisitely  constitutional  methods  of  getting  power, 
their  economic  policies  were  unsound  and  destructive  and 
were  calculated  to  plunge  Great  Britain  into  a  morass 
of  unsound  and  unworkable  economic  experiments  not 
fundamentally  different  from  those  tried  in  Russia.  These 
policies  are  embodied  not  only  In  the  writings  of  J.  Ram- 
say MacDonald  but  also  in  those  of  Sidney  Webb, 
Arthur  Henderson,  Philip  Snowden,  and  others.  They 
belong  to  the  common,  cheap,  garden  variety  of  socialists, 
and  their  economic  policies  do  not  differ  essentially  from 
those  of  Lenin.  If  the  Labor  Party  had  succeeded  in 
establishing  these  policies,  they  would  have  produced  the 
same  results  in  England  as  in  Russia. 

If  one  had  to  choose  between  a  leader  who  achieves 
control  of  national  affairs  by  constitutional  methods  and 
then  uses  that  control  to  ruin  the  country,  and  one  who 
achieves  power  by  unconstitutional  methods  and  then  uses 
it  to  save  the  country  and  put  it  on  the  road  to  prosperity, 
it  would  be  a  hard  choice.  If  MacDonald  had  done  what 
his  writings  lead  one  to  think  that  he  would  have  done, 
it  would  have  been  hard  to  choose  between  Mussolini 
and  MacDonald.  Each  was  about  half  good  and  half 
bad.  MacDonald's  political  methods  were  above  criti- 
cism, but  his  economic  policies  were  stupid.  Mussolini's 
political  methods  were  detestable,  but  his  economic  pol- 
icies were  intelligent  and  constructive.  For  Lenin,  of 
course,  there  was  nothing  good  to  be  said  except  that  he 
was  apparently  sincere — terribly  so — though  ignorant  of 
the  first  principles  of  economics.     It  would  be  Interesting 


ii8  THIS  ECONOMIC  WORLD 

to  know  how  thoroughly  he  was  disillusioned  by  the  fail- 
ure of  his  experiment  and  how  far  that  disillusionment 
was  the  cause  of  his  breakdown  and  death. 

The  best  that  could  be  said  for  MacDonald  was  that 
he  did  not  even  attempt  to  carry  out  his  own  socialistic 
theories.  How  far  that  statement  reflects  upon  his  sin- 
cerity may  be  open  to  question.  It  may  merely  mean 
that  he  knew  perfectly  well  that  the  British  public  was 
not  socialistic  and  would  promptly  oust  him  if  he  tried 
any  socialistic  antics.  In  that  case,  our  hope  for  England 
was  based  upon  our  confidence  In  the  good  sense  of  the 
British  people  rather  than  in  that  of  MacDonald  or  the 
leaders  of  the  Labor  Party.  However,  the  statement 
may  mean  that  responsibility  sobered  him.  The  man  who 
talks  in  an  Irresponsible  and  unsober  way  until  called  upon 
to  make  good,  and  then  suddenly  becomes  sober,  does  not 
show  the  highest  type  of  sincerity. 

BOLSHEVISM  AND  AUTHORITARIANISM 

The  more  brutal  forms  of  authoritarianism,  such  as 
Bolshevism,  make  no  wide  appeal  except  In  those  parts 
of  the  world  where  the  masses  are  Ignorant  and  besotted. 
Contrary  to  the  Marxian  predictions  that  capitalism 
would  automatically  develop  into  communism  and  that 
the  most  highly  developed  capitalistic  countries  would 
be  the  first  to  go  over  to  communism,  precisely  the  op- 
posite Is  happening.  Those  countries  where  capitalism  has 
had  the  highest  development  show  the  least  Interest  In 
either  communism  or  socialism,  while  those  where  capl- 


THE  PRESENT  STATE  OF  LIBERALISM       119 

talism  has  had  the  least  development  are  the  only  ones 
where  the  BolshevikI  have  made  any  headway.  The 
reason  seems  to  be  twofold.  The  first  is  that  capitalism 
cannot  develop  except  in  an  atmosphere  of  intelligence 
and  calculated  self-interest.  The  basis  of  capitalism  is 
thrift,  and  thrift  means  forethought,  which  is  a  form  of 
intelligence.  Intelligence  and  capitalism  go  together. 
The  second  reason  is  that  where  capitalism  is  not  per- 
mitted a  rational  development,  the  masses  are  inevitably 
in  a  state  of  poverty  and  therefore  discontented,  or  at 
least  furnish  material  for  the  promoter  of  discontent. 

It  must  be  remembered,  however,  that  there  are  vast 
populations  that  are  still  in  such  a  state  of  ignorance  and 
besottedness  as  to  make  them  ready  converts  to  Bol- 
shevism. East  and  south  of  Warsaw,  in  the  Old  World, 
and  south  of  the  Rio  Grande,  in  the  New,  are  the  fields 
for  the  propaganda  of  that  phase  of  authoritarianism. 
The  Bolsheviki  have  a  fair  chance  of  dominating  that 
part  of  the  world  unless  they  incur  the  hostility  of  Islam. 
If  there  should  be  an  alliance  between  Bolshevism  and 
Islam,  the  western  world  may  look  for  another  struggle 
with  the  East  like  those  at  Chalons,  at  Tours,  and  at 
Vienna.  When  that  struggle  comes,  it  will  be  fortunate 
if  Berlin  sides  with  the  West. 

While  the  western  world  has  not  taken  seriously  the 
more  savage  forms  of  authoritarianism  and  while  it  has 
rejected,  for  the  time  at  least,  such  expressions  of  the 
authoritarian  spirit  as  the  British  Labor  Party  and  the 
La  Folettisti  in  the  United  States,  yet  there  is  nowhere 
in  sight  (in  1926)   a  strong  and  influential  liberal  party. 


120  THIS  ECONOMIC  WORLD 

Perhaps  it  Is  too  much  to  expect  that  any  party  should 
adhere  to  strict  liberalism  as  a  continuous  policy.  The  exi- 
gencies of  party  politics  and  the  need  for  placating  groups 
of  voters  may  make  "middle  of  the  road"  liberalism  im- 
practicable. As  a  matter  of  fact,  as  will  be  argued  at 
greater  length  in  a  later  chapter,  few  men  are  capable  of 
prizing  liberty  for  its  own  sake.^  The  average  man's  con- 
ception of  liberty  Is  limited  strictly  to  the  things  he  wants 
to  do.  Not  freedom,  but  freedom  to  do  what  they  hap- 
pened to  want  to  do,  was  what  men  fought  for.  The 
man  who  wants  to  talk  will  fight  for  freedom  of  speech, 
though  he  may  not  care  a  fig  for  freedom  to  buy  and  sell 
or  to  do  business.  Men  who  want  to  buy  foreign  goods 
Will  work  for  freedom  of  trade  but  may  not  get  at  all 
excited  over  the  censorship  of  the  press.  Newspaper  men 
are  strong  for  freedom  of  the  press  but  may  think  it  emi- 
nently proper  that  the  movies  should  be  censored.  Men 
who  want  to  drink  alcoholic  liquor  resent  interference 
with  "human  liberty"  as  they  see  it,  but  are  quite  tolerant 
toward  the  strict  regulation  of  the  sale  of  other  narcotics. 
For  much  the  same  reason,  sex  freedom  Is  demanded  by 
people  who  do  not  seem  to  care  whether  anything  else  is 
free  or  not.  In  short,  we  are  all  for  a  laissez  faire  policy 
toward  our  own  businesses,  or  toward  the  particular  things 
that  we  want  to  do.^ 

For  these  reasons  it  is  probably  impossible  to  formu- 

1  Cf.  Chapter  V. 

2  For  example,  a  study  of  the  personnel  of  our  chief  radical  groups  shows 
that,  as  a  whole,  it  is  nnore  interested  in  speech  tlian  in  action.  In  short,  it  is 
strictly  a  party  of  laissez  faire  so  far  as  its  own  special  interests  are  con- 
cerned. 


THE  PRESENT  STATE  OF  LIBERALISM       121 

late  a  liberal  policy  that  will  satisfy  everybody,  yet  there 
ought  to  be  no  great  difficulty  in  getting  a  general  agree- 
ment among  all  lovers  of  liberty  that  the  burden  of  proof, 
in  each  particular  case,  must  be  on  the  authoritarian. 
When  a  specific  question  arises  whether  a  certain  man 
shall  be  permitted  to  do  a  certain  thing  or  not,  the  pre- 
sumption should  be  in  his  favor  unless  positive  reasons 
can  be  shown  why  his  doing  so  should  be  forbidden  by 
authority.  Probably  the  great  majority  would  accept  this 
in  the  same  sense  in  which  they  accept  the  proposition  that 
every  man  shall  be  assumed  to  be  innocent  until  he  is 
proved  to  be  guilty  of  wrong  doing.  But  what  consti- 
tutes valid  reasons  in  the  one  case  or  valid  proof  in  the 
other  will  always  be  open  to  dispute.  When  there  is  gen- 
eral distrust  and  suspicion,  men  are  not  likely  to  require  as 
strong  reasons  for  coercion  or  as  strong  proofs  of  guilt  as 
when  there  is  general  confidence  and  understanding. 
Questions  of  this  kind  may  continue  to  divide  liberal 
parties  unless  the  spirit  of  liberalism  in  its  purer  sense  is 
strong  enough  to  hold  them  together. 

WHAT  DOES  LIBERALISM  MEAN? 

The  fact  is  that  the  word  "liberal"  acquired  its  popu- 
larity when  its  meaning  was  clear.  It  was  associated  with 
the  word  "libert}'"  and  meant  the  opposite  of  authori- 
tarian or  coercionist.  Then  certain  authoritarians  at- 
tempted the  time-worn  trick  of  coming  forward  and  say- 
ing that  the  real  liberals  were,  after  all,  not  those  who 
believed  in  liberty  but  those  who  believed  in  the  beneficent 


122  THIS  ECONOMIC  WORLD 

exercise  of  authority  or  coercion.  In  the  older  sense,  of 
course,  no  two  words  could  be  more  antithetical  than  the 
words  "liberal"  and  "socialist";  unless  they  were  the 
words  "liberal"  and  "communist."  And  yet  today  we  find 
socialists  and  communists  trying  to  pose  as  liberals  while 
demanding  such  extensions  of  authority  as  no  one  else 
would  care  to  contemplate. 

Even  outside  the  ranks  of  extreme  authoritarians,  such 
as  the  socialists  and  communists,  there  is  a  tendency  to 
misuse  the  term  liberal.  A  case  in  point  is  the  common 
tendency  to  use  "liberal"  and  "conservative"  as  opposing 
terms.  Now  the  word  "liberal"  is  not  opposed  to  the 
word  "conservative"  any  more  than  to  the  word  "radi- 
cal." Radical  and  conservative  are  opposite  and  an- 
tithetical terms.  A  person  of  liberal  views  may  as  easily 
be  a  conservative  as  a  radical.  The  word  "liberal"  is  op- 
posed to  the  word  "authoritarian." 

It  may  startle  some  persons  to  learn  that  conservative 
and  conservationist  mean  fundamentally  the  same  thing. 
The  conservative  and  the  conservationist  are  alike  in  the 
primary  fact  that  they  are  both  trying  to  conserve  some- 
thing; they  are  unlike  in  the  secondary  fact  that  they  are 
trying  to  conserve  different  things.  The  conservationist 
wants  to  conserve  certain  physical  resources,  while  the  con- 
servative wants  to  conserve  certain  political,  social,  eco- 
nomic, moral,  or  religious  institutions  or  habits.  The  rad- 
ical is  the  uprooter,  the  conservative  the  conserver.  The 
anti-conservationist  does  not  want  physical  resources  con- 
served but  wants  a  chance  to  uproot  them  or  otherwise 
make  away  with  them.    In  that  sense  he  Is  an  eradicator, 


THE  PRESENT  STATE  OF  LIBERALISM       123 

an  uprooter,  or  a  radical.  If  a  person  desires  to  conserve 
human  liberty  against  the  aggressions  of  government  au- 
thority, he  Is  both  a  conservative  and  a  liberal — a  con- 
servative In  the  sense  that  he  Is  trying  to  conserve  some- 
thing, and  a  liberal  In  that  he  is  for  liberty  as  against  co- 
ercion. If  he  desires  to  uproot  liberty  by  a  drastic  use  of 
government  authority,  he  Is  both  an  authoritarian  and  a 
radical,  which  Is  the  opposite  of  a  liberal.  If,  on  the 
other  hand,  one  desires  to  preserve  and  continue  some 
customary  exercise  of  authority.  In  that  sense  he  Is  not 
only  a  conservative  but  an  authoritarian  and  not  In  any 
sense  a  liberal.  A  person  who  desired  to  destroy  some 
ancient  phase  of  authoritarianism,  such  as  an  established 
church  supported  by  forced  contributions  from  unbelievers 
and  believers  alike,  would  be  a  radical  and  also  a  liberal. 
The  supporter  of  such  an  ancient  form  of  coercion  would 
be  both  a  conservative  and  an  authoritarian.  That  is, 
he  would  be  a  conserver  of  authority. 

Again,  liberalism  Is  not  synonymous  with  democracy. 
A  democratic  organization,  either  In  the  field  of  religion, 
of  education,  or  of  politics,  may  be  quite  as  Illiberal  as  an 
autocratic  organization.  In  the  field  of  religion,  for  ex- 
ample, that  is  quite  likely  to  be  the  case.  A  religious  or- 
ganization may  be  quite  democratic  in  Its  organization 
and  yet  illiberal  In  its  policies.  Its  democracy  may  be 
shown  by  the  fact  that  every  question,  not  only  of  church 
policy  but  also  of  doctrine,  may  be  decided  in  the  most 
thoroughly  democratic  manner  by  free  discussion  and  pop- 
ular vote.  Its  illlberallsm  may  be  shown  by  the  fact  that, 
however  democratic  Its  method  of  deciding  questions  may 


124  THIS  ECONOMIC  WORLD 

be,  it  undertakes  to  coerce  an  unwilling  minority  into  an 
acceptance  of  the  opinions  of  the  majority. 

As  a  matter  of  observed  fact,  some  of  the  most  illiberal 
of  our  religious  denominations  are  the  most  democratic, 
and  some  of  the  most  liberal  are  the  least  democratic.  An 
autocratic  church  that  never  submits  anything  to  free  dis- 
cussion and  a  popular  vote,  but  decides  everything  at  the 
top  and  hands  its  decisions  down  to  the  membership,  may 
at  the  same  time  be  quite  liberal.  So  long  as  the  members 
are  left  free  to  accept  the  opinions  thus  handed  down,  or 
to  reject  them  as  they  see  fit,  so  long  is  that  a  liberal 
church,  however  undemocratic  may  be  its  form  of  organi- 
zation. It  may  be  true  that,  in  the  nature  of  things,  an 
autocratic  organization  is,  on  the  average  and  in  the  long 
run,  more  likely  to  be  illiberal  than  a  democratic  organi- 
zation; but  it  is  not  necessarily  so  in  any  individual  case. 
The  two  terms  democracy  and  liberalism  are  not  synony- 
mous, nor  are  the  terms  autocracy  and  authoritarianism. 

Again,  it  should  be  pointed  out  that  liberalism  and  het- 
erodoxy are  not  identical  in  meaning.  A  very  orthodox 
person  may  be  very  liberal  at  the  same  time.  However 
narrowly  orthodox  a  person  may  be,  he  is  still  a  liberal  if 
he  is  perfectly  willing  that  everyone  else  shall  believe  and 
say  whatever  he  pleases.  It  is  only  when  the  orthodox 
person  tries  to  use  some  kind  of  authority  to  compel 
others  to  believe  as  he  does  or  to  refrain  from  teaching 
the  opposite  that  he  becomes  illiberal.  A  heterodox  per- 
son may  likewise  become  illiberal  if  he  attempts  to  use 
some  kind  of  authority  to  destroy  orthodoxy,  or  to  coerce 
orthodox  persons  into  giving  up  their  orthodoxy.     Both 


THE  PRESENT  STATE  OF  LIBERALISM       125 

the  Soviet  and  the  Mexican  governments  are  heterodox 
enough  to  suit  the  most  atheistic  person  in  the  world,  but 
their  use  of  power  against  the  established  church  is  authori- 
tarian and  not  liberal.  As  a  matter  of  observed  fact, 
there  is  fully  as  large  a  percentage  of  authoritarians 
among  the  heterodox  as  among  the  orthodox  religionists. 
Nearly  everyone  pretends  to  be  opposed  to  the  use  of 
authority  when  he  is  in  a  minority  and  in  no  position  to 
exercise  authority  himself — when,  in  other  words,  he  is 
likely  to  have  it  used  against  himself.  The  real  test 
comes  when  he  is  in  the  majority  and  in  a  position  to  use 
authority  against  those  who  disagree  with  or  oppose  him. 
In  the  field  of  government  the  same  distinction  between 
democracy  and  liberalism  is  continually  showing  itself. 
Some  of  the  most  democratic  governments  are  the  most 
coercive.  The  most  drastic  kind  of  a  prohibitory  law  may 
be  adopted  in  the  most  thoroughly  democratic  manner, 
but  no  one  could  really  maintain  that  the  policy  behind 
such  a  law  was  liberal  rather  than  coercive.  On  the  other 
hand,  an  extremely  autocratic  government  may  be  ex- 
tremely liberal.  That  is,  it  may  make  very  few  regula- 
tions and  may  enforce  them  in  a  very  mild  and  reasonable 
way.  There  is  probably  no  part  of  the  world  where  the 
spirit  of  democracy  is  more  rampant  than  in  those  south- 
ern states  where  the  teaching  of  evolution  in  public 
schools  is  forbidden  by  law.^  If  there  is  any  part  of  the 
world  where  the  common  man  shows  the  minimum  of  re- 
spect for  those  in  high  positions  of  authority,  or  for  those 

*  See   E.  J.  Eberling,   "A  Social   Interpretation:  Tennessee,"   in  Social 
Forces,  September,  1926. 


126  THIS  ECONOMIC  WORLD 

who  regard  themselves  as  especially  wise  and  great,  it  is 
in  those  very  states  where  liberty  of  teaching  is  most 
rigorously  controlled  by  popular  legislation.  If  there  is 
any  part  of  the  world  where  it  Is  commonly  assumed  that 
the  common  man,  acting  In  the  mass,  is  quite  capable  of 
deciding  each  and  every  question.  It  Is  In  those  same 
states;  and  yet  no  one  could  call  such  repressive  legisla- 
tion as  the  anti-evolution  laws  by  the  name  liberal. 

THE  ECONOMIC  IMPORTANCE  OF  LIBERALISM 

It  may  help  us  to  a  proper  understanding  of  some  of 
the  problems  involved  if  we  examine  the  word  "liberal" 
from  still  another  angle.  It  Is  too  commonly  assumed 
that  a  policy  Is  approved  by  the  simple  artifice  of  calling  it 
liberal.  In  other  words,  that  name  Is  assumed  to  be  a  title 
of  respect  rather  than  of  disrespect.  But  there  is  no 
magic  about  the  word  "liberal"  any  more  than  there  is 
about  such  words  as  "democratic"  or  "religious."  A 
liberal  policy  may  be  either  good  or  bad  according  to  Its 
results,  and  the  same  may  be  said  of  an  illiberal,  a  demo- 
cratic, an  undemocratic,  a  religious,  or  a  non-religious 
policy.  It  is  futile,  for  example,  to  imagine  that  pro- 
hibitory laws  are  to  be  condemned  by  merely  proving  that 
they  are  illiberal,  or  commended  by  merely  proving  that 
they  are  democratic. 

Let  it  be  granted,  for  the  sake  of  argument,  that  any 
extension  of  authority  Is  In  Itself  undesirable;  that  It  In- 
volves an  Increase  In  tax  eaters  in  the  form  of  more  and 
more  government  officials,  and,  what  Is  of  vastly  greater 


THE  PRESENT  STATE  OF  LIBERALISM       127 

importance,  that  it  involves  a  great  deal  of  espionage  and 
meddling  by  those  officials  to  find  out  who  is  to  be  re- 
pressed and  who  is  not,  and  that  as  the  number  of  govern- 
ment officials  increases  they  come  to  exercise  more  and 
more  political  power  through  their  votes  and  those  of 
their  friends  and  followers,  and  finally,  that  the  inevi- 
table tendency  of  a  large  class  of  government  officials  is 
to  magnify  their  own  offices  and  seek  more  and  more  au- 
thority. All  these  undesirable  things  may  still  be  re- 
garded as  necessary  costs,  or  the  prices  we  have  to  pay 
for  certain  desirable  results.  The  only  real  question  is, 
not  is  it  costly,  but  will  the  benefit  justify  the  cost,  or  is  it 
worth  the  price? 

From  this  point  of  view,  a  broadly  intelligent  attitude 
is  not  one  that  blindly  opposes  all  exercise  of  authority. 
It  is  rather  one  that  scrutinizes  every  proposed  extension 
of  authority,  that  recognizes  that  the  exercise  of  authority 
by  one  man  over  another  is  a  positively  undesirable  thing 
and  compares  this  undesirable  thing  with  any  good  that 
may  reasonably  be  expected  as  a  result.  Even  though  the 
one  who  exercises  authority  has  been  elected  to  public 
office,  it  is  unpleasant  in  itself  for  him  to  undertake  to 
tell  others  what  they  may  or  may  not  do.  However,  this 
unpleasantness  has  to  be  endured  in  many  specific  cases 
because  of  a  large  benefit  to  be  secured  through  the  exer- 
cise of  authority.  Therefore,  a  wise  person  is  one  who 
carefully  balances  the  costs  or  unpleasantnesses  of  au- 
thority against  the  utilities  to  be  secured,  and  justifies  au- 
thority only  when  the  balance  is,  beyond  all  question,  in 
favor  of  authority. 


128  THIS  ECONOMIC  WORLD 

Even  among  wise  and  reasonable  persons  there  must 
always  be  differences  of  opinion  as  to  the  balance  of  good 
and  evil  in  such  a  case.  The  exercise  of  authority  by  one 
person  over  another  is  more  irritating  to  certain  tempera- 
ments than  to  others,  and  the  cost  of  authority  will  there- 
fore seem  higher  to  some  than  to  others.  Similar  differ- 
ences of  opinion  will  exist  as  to  the  good  to  be  expected 
from  any  proposed  extension  of  authority.  While  such 
differences  must  continue  to  exist,  something  is  gained  if 
we  can  all  accept  the  proposition  that  every  extension  of 
authority  is  costly  and  is  to  be  undertaken  only  when  the 
good  to  be  secured  will  clearly  outweigh  the  cost.  They 
who  regard  the  freedom  of  the  individual  with  positive 
disfavor,  and  therefore  welcome  the  extension  of  au- 
thority as  a  good  in  itself,  will  never  add  clarity  to  the 
discussion  of  such  problems,  nor  wisdom  to  their  decision. 

The  simple  truth  is  that  three  things  must  be  achieved 
by  any  country  that  hopes  to  be  prosperous.  If  they  can 
be  achieved  by  putting  everyone  under  authority,  as  in  an 
army,  the  country  may  prosper.  If  they  can  be  achieved 
by  leaving  everyone  to  himself,  the  country  may  likewise 
prosper.  If  they  can  be  achieved  by  regulating  some 
things  by  government  authority  and  leaving  others  unreg- 
ulated, the  country  still  can  prosper. 

In  the  broadest  possible  terms,  these  things  may  be 
stated  as  follows.  First,  the  energies  of  the  people  must 
be  released,  must  become  active  and  not  be  wasted  in 
mere  sloth.  Second,  these  energies  must  be  directed  to- 
ward productive  rather  than  destructive  ends.  Third,  they 
must  be  so  wisely  directed  or  economized  as  to  promote 


THE  PRESENT  STATE  OF  LIBERALISM       129 

these  productive  ends  most  efficiently;  that  is,  with  the 
least  waste  of  effort. 

In  simpler  terms,  if  the  people  are  active,  if  their  activi- 
ties are  directed  toward  useful  rather  than  useless  or 
harmful  ends,  and  if  they  direct  their  activities  intelli- 
gently or  economically  toward  those  useful  ends,  they  will 
prosper.  Needless  to  say,  any  country  that  excels  others 
in  these  three  respects  will  prosper  more  than  they. 

Needless  to  say,  also,  all  three  of  these  things  must  be 
achieved,  and  not  any  one  or  two  of  them  alone.  Under  a 
military  organization,  for  example,  the  harmful  activities 
of  individuals  may  be  effectively  repressed,  but  that  is  not 
enough  to  secure  prosperity  if,  in  repressing  all  harmful 
activities,  spontaneity  and  inventiveness  are  also  repressed. 
Under  extreme  laissez  faire  conditions  there  may  be  a 
great  deal  of  spontaneity  and  inventiveness,  but  if  It 
shows  itself  merely  in  finding  ways  of  getting  the  better  of 
one  another,  there  will  not  be  much  prosperity. 

It  was  the  sincere  belief  of  the  liberals  of  the  older 
school  that  these  three  things  were  accomplished  In  largest 
measure  where  individuals  were  left  reasonably  free  to 
direct  their  own  activities.  This  did  not  mean,  in  any 
case,  absolute  freedom  from  legal  restraint.  It  was  the 
belief  that  If  the  cruder  forms  of  destruction  were  re- 
pressed, such  as  crimes  of  violence  and  fraud,  and  If  men 
were  encouraged  to  make  their  arrangements  with  their 
fellows  on  the  basis  of  voluntary  agreement  honestly 
entered  into  and  honestly  carried  out,  the  maximum  of 
productive  activity  would  be  secured,  and  the  maximum 


130  THIS  ECONOMIC  WORLD 

of  productivity  would  be  followed  by  the  maximum  of 
prosperity.  Some  of  the  more  constructive  among  them 
also  proposed  other  measures,  such  as  popular  education 
at  public  expense,  in  order  that  the  productivity  of  every 
individual  might  be  raised  to  the  maximum,  the  direction 
of  as  much  high  talent  as  possible  into  industrial  chan- 
nels, in  order  that  industry  might  be  intelligently  organ- 
ized and  directed,  the  elimination  of  all  caste  or  feeling  of 
disrespect  toward  business,  in  order  that  business  might 
attract  its  fair  share  of  the  best  talent  of  the  country. 
There  are  strong  reasons,  both  theoretical  and  empirical, 
for  believing  that  they  were  right.  Among  the  empirical 
reasons  may  be  mentioned  the  general  fact  that  those 
countries  that  now  show  the  greatest  prosperity  are  pre- 
cisely the  countries  where  these  things  were  looked  after 
and  provided  for. 

The  opponents  of  liberalism,  however,  have  persis- 
tently misstated  and  misinterpreted  the  liberal  position. 
The  liberal  is,  for  example,  accused  of  basing  his  reason- 
ing on  a  number  of  false  assumptions,  such  as  the  assump- 
tion that  every  individual  is  reasonable  and  well  enough 
informed  to  look  after  his  own  interests;  again,  that  com- 
petition leads  to  the  survival  or  the  prosperity  of  those 
who  are  socially  most  desirable,  or  that  wealth  commonly 
goes  to  those  who  are  most  useful,  or  that  market  values 
and  social  values  are  identical.^  None  of  these  assump- 
tions is  necessary  to  the  liberal  position. 

^  Somewhat  similar  assumptions  are  put  into  the  mouths  of  economists  of 
the  liberal  school  by  Mr.  Henry  Clay  in  his  Economics  for  the  General 
Reader,  chap.  xxii. 


THE  PRESENT  STATE  OF  LIBERALISM       131 

THE  MOVEMENT  FROM  STATUS  TO  CONTRACT 

The  concept  of  liberalism  herein  expounded  is  parallel 
if  not  identical  with  the  most  famous  of  modern  defini- 
tions of  legal  and  political  progress,  that  of  Sir  Henry 
Maine,  which  is  summed  up  in  the  statement  that  "the 
movement  of  all  progressive  societies  has  hitherto  been  a 
movement  from  status  to  contract.^  In  more  expanded 
form  it  reads : 

There  are  few  general  propositions  concerning  the  age  to  which 
we  belong  which  seem  at  first  sight  likely  to  be  received  with 
readier  concurrence  than  the  assertion  that  the  society  of  our  day 
is  mainly  distinguished  from  that  of  preceding  generations  by  the 
largeness  of  the  sphere  which  is  occupied  in  it  by  Contract.  Some 
of  the  phenomena  on  which  this  proposition  rests  are  among  those 
most  frequently  singled  out  for  notice,  for  comment,  and  for 
eulogy.  Not  many  of  us  are  so  unobservant  as  not  to  perceive 
that  in  innumerable  cases  where  the  old  lav^^  fixed  a  man's  social 
position  at  his  birth,  modern  law  allows  him  to  create  it  for  him- 
self by  convention ;  and  indeed  several  of  the  few  exceptions  which 
remain  to  this  rule  are  constantly  denounced  with  passionate  in- 
dignation.^ 

Contract  is,  from  an  economic  point  of  view,  a  phase 
of  economic  voluntarism.  It  is  an  Instrument  by  means  of 
which  two  or  more  men  may  voluntarily  coordinate  their 
efforts.  It  makes  possible  voluntary  coordination  on  a 
large  scale  as  well  as  on  a  small  scale. 

Under  the  older  systems,  large  enterprises  were  carried 
out,  as  military  enterprises  are  still  carried  out,  by  au- 
thority and  obedience.     The  coordinating  power  was  au- 

^  From  Ancient  Laiv  (Pollock's  edition,  London,  1906),  chap,  v,  p.  173. 
See  also  Sir  Frederic  Pollock's  comments  on  chapter  v. 

^Ibid.,  p.  319.     See  also  pp.  170,  172,  321,  322,  326,  328,  349,  37s,  376. 


132  THIS  ECONOMIC  WORLD 

thority.  Under  authority,  large  numbers  of  men  can  be 
compelled  to  act  according  to  a  great  plan,  and  their 
efforts  organized,  coordinated,  and  all  made  to  bear  upon 
a  common  purpose.  But  one  of  the  great  discoveries  of 
the  human  mind,  comparable  in  importance  with  the 
alphabet  or  the  Arabic  system  of  notation,  is  that  large 
numbers  of  men  can  coordinate  their  efforts  by  voluntary 
agreement  among  free  citizens.  Recognition  of  this  great 
fact,  with  a  firm  belief  that  it  is  capable  of  much  greater 
development  than  we  have  yet  seen,  is  a  characteristic  of 
all  genuinely  liberal  minds.  Impatience  with  its  slow  de- 
velopment or  fear  that  it  can  never  accomplish  what  lib- 
erals think  it  will  is  a  characteristic  of  all  illiberal  minds. 

Perhaps  liberals  were  too  optimistic,  or  hoped  for  a  too 
rapid  development  of  the  principle  of  voluntary  agree- 
ment among  free  citizens  as  the  method  of  getting  things 
done.  If  so,  that  may  explain  the  present  reaction  toward 
rehance  upon  authority,  or  the  apparent  slump  of  liberal- 
ism. However,  it  is  not  unlikely  that  the  pendulum  will 
again  swing  the  other  way.  A  few  bitter  disappoint- 
ments over  the  anticipated  results  of  authoritarianism 
may  turn  the  world  again  toward  liberalism. 

Authority  is  not  exercised  by  government  officials  alone. 
The  weight  of  ancient  customs  is  even  more  powerful 
than  government  in  creating  status  and  holding  a  man  in 
the  station  in  which  he  is  born.  In  proportion  as  men  are 
relieved  from  this  condition  and  encouraged  to  carve  out 
their  own  careers,  with  no  hindrances  and  handicaps  ex- 
cept their  own  physical,  mental,  and  moral  limitations,  in 
that  proportion  will  each  man's  contribution  to  the  na- 


THE  PRESENT  STATE  OF  LIBERALISINI       133 

tional  economy  be  increased.  Similarly  and  for  the  same 
reason,  in  proportion  as  land  and  all  forms  of  property 
are  freed  from  customary  encumbrances  and  each  one 
made  a  merchantable  commodity,  that  is,  in  proportion  as 
its  ownership  and  use  is  determined  by  contract,  in  that 
proportion  will  all  these  things  be  put  to  their  most  pro- 
ductive uses.  These  are  propositions,  with  the  few  ex- 
ceptions noted,  capable  of  logical  proof,  but  the  proof 
requires  some  patient  analysis. 

Let  us  take  as  our  first  illustration  something  that  will 
be  at  once  recognized  as  a  factor  in  production  or  a  pro- 
ductive agent,  namely,  irrigation  water.  In  most  irri- 
gated regions  there  is  a  great  deal  more  land  than  can  be 
satisfactorily  irrigated  with  the  existing  supply  of  water. 
To  spread  the  water  over  all  the  land  would  do  very  little 
good  because  there  would  not  be  enough  on  any  of  it  to 
grow  a  crop.  It  is  therefore  necessary  to  leave  some  of 
the  land  unirrigated  in  order  that  the  rest  of  it  may  have 
sufficient  water  really  to  grow  crops.  That  is  to  say,  if 
this  is  done,  more  crops  will  be  grown  and  more  people 
supported  than  could  possibly  be  done  by  trying  to  Irrigate 
all  the  land. 

The  question  then  arises,  what  land  to  Irrigate  and 
what  to  leave  unirrigated.  It  will  be  a  strange  region  if 
some  portions  of  the  land  are  not  more  productive  than 
others.  If  there  are  differences  in  the  productivity  of  the 
land,  either  because  of  accessibility,  contour,  plant  food, 
or  any  other  of  the  factors  that  make  up  productivity,  it 
Is  obvious  that  more  could  be  grown  if  all  the  limited  sup- 
ply of  water  is  put  onto  the  land  that  will  respond  most 


134  THIS  ECONOMIC  WORLD 

vigorously  to  irrigation  than  if  some  of  it  were  put  onto 
land  that  was  inferior  in  that  respect.  To  irrigate  land 
that  will  yield  only  25  bushels  of  wheat  to  the  acre  when 
land  could  be  irrigated  at  equal  expense  that  would  yield 
50  bushels  to  the  acre  would  be  a  waste  of  water.  The 
sum  total  of  the  produce  of  an  irrigation  project  where 
that  mistake  was  made  would  be  measurably  less  than  it 
might  be  if  the  50-busheI  land  were  all  irrigated,  and  if 
any  land  that  had  to  be  left  unirrigated  would  be  the  25- 
bushel  land.  These  are  physical  and  arithmetical  facts 
and,  of  course,  would  apply  to  a  communistic  as  well  as  to 
a  capitalistic  system. 

The  next  question  would  be  how  to  secure  a  proper 
selection  of  the  land  for  irrigation  purposes  or  to  see  that 
no  25-bushel  land  was  irrigated  and  no  50-bushel  land  left 
unirrigated  within  the  irrigation  system.  One  possible 
way  to  accomplish  this  is  to  sell  irrigation  water  to  the 
highest  bidders.  The  farmer  who  has  so-bushel  land  could 
then  afford  to  pay  more  for  water  than  the  farmer  who 
has  25-bushel  land.  Whatever  might  be  said  as  to  the 
effectiveness  of  this  plan  on  abstract  grounds,  it  could  at 
least  be  said  that  more  wheat  would  be  grown  and  more 
people  could  be  fed  if  the  50-bushel  land  got  the  water 
than  if  the  25-bushel  land  got  it. 

There  may  be  differences  among  farmers  as  well  as 
among  acres  of  land.  One  farmer  may  be  so  skillful  as 
an  irrigator  that  if  he  is  given  the  use  of  water  on  his 
land  he  can  make  it  yield  50  bushels  to  the  acre,  where 
a  poorer  or  less  skillful  farmer  would  use  it  so  ineffec- 
tively as  to  make  it  yield  only  25  bushels  to  the  acre.  This 


THE  PRESENT  STATE  OF  LIBERALISM       135 

might  be  true  under  communism  as  well  as  under  individ- 
ualism. Again,  the  question  would  arise,  how  to  be  rea- 
sonably certain  that  the  50-bushel  farmer  would  take  prec- 
edence over  the  25-bushel  farmer  in  the  distribution  of 
irrigation  water.  One  possible  way  in  this,  as  in  the  other 
case,  is  to  let  them  bid  for  it,  the  50-bushel  farmer  being 
able  to  pay  more  for  his  irrigation  water  than  the  25- 
bushel  farmer  could  possibly  pay. 

Of  course,  there  are  many  other  ways  by  which  the  dis- 
tribution might  be  made.  We  can  at  least  say  that  under 
the  process  of  buying  and  selling,  which  is  one  phase  of 
the  system  of  contract,  productive  agencies  tend  to  get 
into  the  hands  of  those  who  can  make  the  most  effective 
use  of  them.  In  so  far  as  that  is  achieved,  the  production 
of  wealth  is  enlarged,  and  the  maximum  number  of  people 
are  enabled  to  live  or  to  live  on  the  maximum  scale. 

This  principle  of  distribution,  however,  applies  to  other 
things  than  irrigation  water.  In  fact,  it  seems  to  apply 
to  labor  itself.  If,  in  any  community  or  in  any  industrial 
system,  labor  is  directed  by  inefficient  managers,  it  will  of 
course  produce  less  than  it  would  produce  if  it  were 
directed  by  superior  managers.  Or,  if  labor  is  allowed 
to  waste  itself  working  on  poorer  land  or  with  poorer 
equipment,  it  will  produce  less  than  it  might  produce  If  It 
were  put  to  work  on  good  land  or  with  better  equipment. 
Even  if  the  laborer  directs  himself  but  directs  himself 
very  inefficiently,  his  product  will  be  less  than  it  might  be 
if  he  were  directed  by  someone  else.  All  this  that  we  have 
said  about  labor,  like  that  which  we  said  about  irrigation 
water,  would  be  true  of  communism  as  well  as  of  indi- 


136  THIS  ECONOMIC  WORLD 

vidualism.  A  communistic  group  that  made  the  mistake 
of  allowing  labor  to  be  directed  by  inefficient  directors 
would  not  produce  as  much  as  it  might  produce  if  it  man- 
aged to  put  its  labor  under  superior  directors.  The  ques- 
tion in  this  case,  as  in  that  of  the  distribution  of  irrigation 
water,  is  how  to  be  reasonably  certain  that  labor  will  be 
under  the  direction  of  those  who  are  in  a  position  to  direct 
it  most  productively.  The  answer  in  this  case  Is  the  same 
as  in  the  other;  that  Is,  one  way  is  by  competitive  bidding. 
If  A  can  afford  to  offer  B  more  than  B  can  make  when  he 
works  for  himself,  there  is  a  chance  then  that  B  will  quit 
working  for  himself  and  work  for  wages  under  A's  direc- 
tion. If,  however,  C  is  either  a  more  skillful  director  or 
has  better  land  or  equipment  than  A,  C  can  offer  B  more 
wages  than  A  can  afford  to  pay,  and  A  will  therefore  find 
it  to  his  own  interest  to  work  for  C. 

A  thousand  other  illustrations  of  the  same  principle 
might  be  given.  This  is  not  a  final  and  unanswerable  argu- 
ment In  favor  of  freedom  of  contract  in  all  different  rela- 
tions. It  merely  argues  that  unless  some  superior  method 
can  be  found  by  means  of  which  irrigation  water,  labor, 
capital,  and  all  the  other  factors  of  production  can  be 
distributed,  we  shall  do  well  to  let  the  method  of  con- 
tract, of  voluntary  agreement,  and  of  free  buying  and  sell- 
ing perform  this  important  function.  That  no  superior 
method  has  yet  been  found  that  could  be  operated  on  a 
large  scale  seems  to  be  evidenced  by  the  fact  that  the  high- 
est prosperity  in  the  world  today  Is  found  In  those  coun- 
tries where  freedom  of  contract  is  least  impaired,  where 
even  land  is  a  merchantable  commodity  and  not  held  In 


THE  PRESENT  STATE  OF  LIBERALISM       137 

entailed  estates,  where  there  are  very  few  hindrances  to 
its  free  transfer  from  one  person  to  another,  where  labor 
is  mobile  and  flows  freely  from  one  neighborhood  to  an- 
other, from  one  employer  to  another,  from  one  industry  to 
another.  We  have  here  at  least  a  pragmatic  argument 
which,  though  not  final  and  applicable  to  all  times  and 
places,  should  at  any  rate  be  given  careful  consideration 
and  not  rejected  too  easily.  It  is  worth  rather  more  than 
the  cocksure  statements  of  theorists  who  have  never  dem- 
onstrated their  capacity  to  direct  any  productive  agency 
successfully. 


IV 


THE  COMPETITIVE  SYSTEM 

AN  ENGLISH  socialist,  Mr.  Bertrand  Russell,  has 
L  been  quoted  as  saying  to  a  group  of  Harvard  under- 
graduates that  he  thought  that  twenty-two  football  men 
could  make  more  touchdowns  and  kick  more  goals  by 
cooperating  than  by  competing.  This  was  intended  as 
an  argument  against  the  competitive  system.  One  who  is 
not  capable  of  imagining  any  kind  of  competition  except 
the  kind  which  is  carried  on  between  two  football  teams 
might  be  puzzled  even  if  he  was  not  convinced  by  such  an 
argument.  One  who  realizes  that  there  are  many  other 
kinds  of  competition  would  at  least  see  the  insufficiency 
of  it. 

If  the  blocking  of  the  opposing  team  were  strictly  pro- 
hibited, and  if  each  team  were  compelled  to  keep  within 
its  own  territory  and  to  make  touchdowns  and  kick  goals 
at  different  ends  of  the  field,  and  if  competition  under 
these  conditions  could  be  stimulated  by  some  highly  desir- 
able award,  it  is  probable  that  more  touchdowns  and  goals 
would  be  made  than  under  any  form  of  cooperation. 
That  would  be  much  more  like  competition  between  two 
business  establishments  than  is  the  game  of  football  as 
commonly  played.  But  if  two  rival  establishments  were 
permitted  to  block  one  another  in  all  the  rough  and  tumble 

138 


THE  COMPETITIVE  SYSTEM  139 

ways  that  are  permitted  to  two  rival  football  teams,  that 
form  of  competition  would  doubtless  be  inferior  in  pro- 
ductivity to  cooperation  or  almost  anything  else.  But  we 
are  not  compelled  to  choose  between  cooperation  on  the 
one  hand  and  that  special  kind  of  competition  on  the 
other.  Our  choice  is  between  compulsory  cooperation, 
on  the  one  hand,  in  which  independent  enterprise  is  sup- 
pressed, and  a  restricted  competition  on  the  other,  in 
which  all  destructive  activity  is  suppressed  and  every  kind 
of  productive  activity  is  permitted  and  encouraged.  Com- 
petition thus  becomes  rivalry  in  production  and  not  rivalry 
in  destruction. 

The  term  free  or  unrestricted  competition  is  a  mis- 
nomer. There  is  no  such  thing  in  any  civilized  country 
and  there  never  was.  The  thing  which  distinguishes 
economic  competition  from  the  brutal  struggle  for  exist- 
ence is  regulation,  standardization,  or  the  determination 
of  what  may  be  done  and  what  may  not  be  done  in  the 
pursuit  of  self-interest.  The  suppression  of  violence  and 
fraud,  even  if  nothing  else  is  done,  is  a  regulation  of  com- 
petition. It  means  that  each  competitor  must  succeed,  if 
he  succeeds  at  all,  by  some  other  method.  There  is  then 
left  open  to  him  such  methods  as  persuasion  and  produc- 
tion. Persuasion  is  sometimes  difficult  to  distinguish 
from  fraud  or  misrepresentation,  as  in  the  cruder  cases  of 
advertising,  salesmanship,  demagogy,  and  courting,  but 
there  are  numerous  cases  where  the  distinction  is  easily 
made.  In  so  far  as  competition  takes  the  form  of  rivalry 
in  production  or  in  the  performance  of  service,  that  is,  in 
so  far  as  the  individual  is  led  to  try  to  succeed  or  to  get 


140  THIS  ECONOMIC  WORLD 

what  he  wants  by  trying  to  produce  a  better  product  or 
render  a  better  service  than  his  rivals  in  order  that  he  may 
get  a  better  wage,  salary,  price,  or  profit,  there  is  not  much 
to  be  said  against  it.  It  is  a  means  by  which  production  is 
stimulated  and  the  world  filled  with  goods.  It  is  a  means 
by  which  certain  powerful  human  motives  are  harnessed 
to  service  and  the  largest  possible  number  of  persons  are 
induced  to  do  the  largest  possible  number  of  desirable 
things.     That  is  prosperity. 

We  are  not  even  asked  by  the  socialist  to  choose  be- 
tween voluntary  cooperation  on  the  one  hand  and  some 
form  of  competition  on  the  other.  Voluntary  cooperation 
is  quite  consistent  with  the  present  economic  system. 
There  is  nothing  to  prevent  its  spreading  or  even  becom- 
ing universal  except  the  preference  for  competition  on  the 
part  of  considerable  numbers  of  people.  The  socialist  is 
not  content  with  the  voluntary  spread  of  voluntary  co- 
operative organizations.  He  knows  that  there  is  a  limit 
to  that  and  he  has  misgivings  as  to  whether  voluntary 
cooperative  organizations  can  survive  alongside  of  indi- 
vidualistic organizations.  He  wants  compulsory  coopera- 
tion, or  a  system  under  which  even  those  who  prefer 
competition  are  not  permitted  to  compete  or  to  run 
business  enterprises  in  competition  with  cooperative  enter- 
prises. If  one  were  compelled  to  choose  between  com- 
pulsory cooperation,  even  on  a  football  field,  and  the  kind 
of  competition  which  one  finds  there,  it  is  not  certain  that 
he  would  choose  wisely  if  he  chose  compulsory  coopera- 
tion. As  between  compulsory  cooperation,  even  at  its 
best,  and  competition  when  it  is  limited  to  the  methods  of 


THE  COMPETITIVE  SYSTEM  141 

persuasion  and  production,  most  people  seem  to  prefer 
competition.  There  are  sound  economic  reasons  why 
they  should. 

Much  has  been  written  about  the  wastes  of  competi- 
tion, and  there  is  waste  in  competition  as  in  everything 
else.  To  show  that  there  is  waste  in  competition,  how- 
ever, is  not  enough  to  prove  that  we  ought  to  try  some- 
thing else.  We  must  first  be  convinced  that  there  is  more 
waste  in  competition  than  in  compulsory  cooperation  or 
whatever  system  is  to  be  substituted  for  competition. 
That  has  not  been  shown,  nor  can  it  be  shown. 

To  begin  with,  compulsory  cooperation  in  industry 
would  require  a  strong  compelling  power.  That  com- 
pelling power  is  government.  If  government  is  demo- 
cratic, there  will  be  competition  for  office  under  the  gov- 
ernment, that  is,  there  will  be  elections  and  campaigns 
preceding  them.  Even  business  competition  is  probably 
less  wasteful  than  a  political  campaign. 

They  who  are  so  zealous  for  the  elimination  of  the 
wastes  of  competition  should  not  stop  with  business  com- 
petition. Suppose  that  through  state  socialism  or  some 
similar  device  all  business  competition  were  completely 
eliminated.  This  would  certainly  add  to  the  powers  of 
government  and  increase  the  number  of  government 
offices.  This  would  increase  the  number  of  candidates 
and  intensify  political  campaigns.  Our  zealot  for  the 
elimination  of  waste  would  then  need  to  turn  his  attention 
to  this  form  of  waste  and  eliminate  political  competition. 
This  would  mean  making  a  monopoly  of  government, 
under  a  dictator  or  a  monarch.     This  may  be  economical. 


142  THIS  ECONOMIC  WORLD 

In  fact,  Mussolini  in  part  justifies  his  dictatorship  on  the 
ground  of  its  superior  economy,  asserting  that  democracy 
is  an  expensive  luxury  to  be  enjoyed  only  by  rich  countries. 

There  is  another  group  of  writers  who  admit  that 
economic  competition,  though  otherwise  disagreeable  and 
a  violation  of  our  higher  moral  sentiments,  is  a  means  of 
increasing  productivity;  who  assert  that  while  competition 
is  not  the  ideal  system,  it  has  a  pragmatic  advantage  In 
the  present  state  of  human  development  in  that  it  works. 
One  writer  has  even  admitted  that,  although  it  has  no 
justification  in  ethics  or  religion.  It  has  the  one  advantage 
of  Increasing  productivity.  This  is  probably  not  an  ac- 
curate statement  of  the  case.  It  is  probably  not  true  that 
the  strongest  hold  the  competitive  system  has  upon  the 
world  is  the  fact  of  its  efficiency  in  stimulating  production. 
On  the  contrary,  It  is  probable  that  its  strongest  hold  is  In 
the  fact  that  It  comes  more  nearly  than  cooperation  to 
being  an  actual  expression  of  human  nature. 

It  is  very  difficult  for  us  even  to  amuse  ourselves  with- 
out some  element  of  competition.  Find  out  what  amuses 
people,  what  gives  them  a  thrill  or  leads  to  a  feeling  of 
exaltation,  and  you  at  least  have  a  clue  to  some  of  the 
essential  qualities  in  human  nature.  You  will  not  have  to 
go  very  far  to  discover  that  tens  of  thousands  of  people 
will  turn  out  to  witness  a  competition  of  one  sort  or  an- 
other, ranging  all  the  way  from  prize  fights  to  games  of 
golf.  Newspapers,  which  probably  sense  the  public  feel- 
ing pretty  accurately,  will  give  columns  of  space  to  games 
of  chess  or  whist.  You  will  have  to  go  a  long  way  before 
you  find  tens  of  thousands  of  people  turning  out  to  watch 


THE  COMPETITIVE  SYSTEM  143 

men  cooperate,  where  there  is  no  element  of  competition 
involved. 

Those  who  have  been  more  or  less  active  in  the  promo- 
tion of  agricultural  cooperation  have,  in  some  cases  at 
least,  reached  the  conclusion  that  farmers  do  not  like  to 
cooperate,  but  that  they  will  do  so  in  order  to  save  them- 
selves from  bankruptcy  or  definitely  to  increase  their 
pecuniary  incomes.  Unless  they  can  be  shown  that  co- 
operation is  their  salvation  from  bankruptcy  or  that  it  will 
definitely  and  measurably  increase  their  cash  incomes,  they 
usually  take  no  interest  in  it.  These  and  a  number  of 
other  observations  lead  one  to  the  definite  conclusion  that 
men  prefer  competition  to  cooperation  and  will  engage  in 
cooperation,  year  after  year  and  decade  after  decade,  only 
under  the  cash  motive.  A  remarkable  enthusiasm  for 
cooperation  is  sometimes  developed,  but  invariably,  so  far 
as  observation  goes,  it  has  been  short-lived  unless  it  pays 
in  cash,  which  it  sometimes  fails  to  do.  The  enthusiasm 
oozes  out  through  the  fingertips,  and  unless  there  is  money 
to  be  made  by  it,  interest  wanes  and  the  people  return  to 
competition.  There  are  not  many  exceptions  to  this  rule. 
There  are  dozens  of  cases  that  come  under  it. 

Of  course,  there  are  those  who  deny  that  the  liking  for 
competition  is  an  expression  of  human  nature  but  assert 
that,  on  the  contrary,  these  present  human  tendencies  are 
themselves  mere  social  habits  that  have  been  acquired  be- 
cause each  generation  has  grown  up  in  an  atmosphere  of 
competition.  On  that  assumption  it  is  believed,  by  those 
who  accept  it,  that  if  we  could  bring  up  a  generation  in  an 
atmosphere  of  universal  cooperation  and  never  permit 


144  THIS  ECONOMIC  WORLD 

them  to  form  the  habit  of  competition  or  even  of  witness- 
ing competition  in  any  form,  a  complete  change  in  human 
behavior  could  be  effected.  In  that  case,  we  might  see 
tens  of  thousands  of  people  turn  out  to  witness  coopera- 
tion untainted  by  any  competitive  element.  Sports, 
dramas,  novels,  and  everything  else  in  which  men  are  now 
interested  would  either  be  eliminated  or  so  revolutionized 
as  to  contain  no  elements  of  rivalry  or  competition. 

The  assumption  that  the  existence  of  competition 
creates  an  appetite  for  it,  and  that  the  appetite  for  com- 
petition does  not  account  for  its  existence,  is  of  more  than 
doubtful  validity  (more  of  this  later).  But  aside  from 
this,  there  are  many  practical  difficulties  in  the  way  of  a 
thoroughgoing  test.  To  begin  with,  mere  socialism  or 
communism  would  not,  as  pointed  out  above,  eliminate  all 
rivalry  or  competition.  So  long  as  democracy  survived 
there  would  be  politics,  campaigning  for  rival  causes  or 
policies,  even  running  for  office  by  candidates  who  stood 
for  rival  policies;  possibly  there  would  even  be  running 
for  office  by  candidates  who  merely  wanted  the  power, 
dignity,  or  distinction  that  went  with  high  office.  In  short, 
to  make  the  experiment  complete,  political  as  well  as 
economic  competition  would  have  to  be  eliminated.  That 
would  require  a  dictatorship  under  which  everyone  who 
showed  the  slightest  disposition  to  oppose  the  dictator  or 
to  compete  with  him  for  public  favor  would  be  summarily 
disposed  of. 

Again,  rivalry  might  develop  in  the  field  of  love- 
making.  If  two  young  men  ever  strove  for  the  hand  of 
the  same  young  lady,  or  two  young  ladies  for  the  hand  of 


THE  COMPETITIVE  SYSTEM  145 

the  same  young  man,  there  would  certainly  be  competi- 
tion. This  might  excite  the  interest  of  bystanders  and 
neighbors.  That  interest  might  lead  novelists,  drama- 
tists, and  film  makers  to  try  to  cash  in  on  it  by  writing 
stories  and  plays  and  by  manufacturing  films  built  upon 
that  theme.  In  order  to  eliminate  the  erotic  form  of 
competition,  it  would  be  necessary  for  the  dictator  to  as- 
sume the  function  of  a  universal  matchmaker,  or  else  to 
have  every  marriage  determined  by  some  rigid  law  of 
status  rather  than  by  contract.  Freedom  and  competition 
in  this  field  at  least  seem  to  go  together.  Not  only  would 
marriage  have  to  be  determined  without  rivalry,  but  a 
considerable  number  of  stories  and  plays  would  have  to  be 
rewritten  or  suppressed.  Otherwise,  some  of  the  rising 
generation  might  read  them  and  learn  to  like  the  idea  of 
rivalry  or  competition.  If  they  learn  to  like  it  in  one 
field,  there  is  no  assurance  that  they  would  not  carry  that 
liking  over  into  other  fields. 

If  the  rising  generation  is  to  be  completely  safeguarded 
against  the  demoralizing  sight  of  competition,  it  must  also 
be  deprived  of  such  pets  as  kittens,  puppies,  lambs,  and 
colts.  Such  pets  will  almost  certainly  play,  and  play  with 
them  is  almost  certain  to  take  the  form  of  mimic  combats. 
Perhaps,  however,  these  pets  could  be  reformed.  Pos- 
sibly their  play  takes  the  form  of  mimic  combats,  not 
because  it  is  an  expression  of  their  nature,  but  because, 
through  association  with  human  beings,  they  too  have 
grown  up  in  an  atmosphere  of  competition.  If  so,  by 
merely  surrounding  them  with  an  atmosphere  of  coopera- 
tion they  would  be  so  changed  in  their  behavior  as  never 


146  THIS  ECONOMIC  WORLD 

to  be  found  "a-playing  at  a  combat  in  the  attic"  or  any- 
where else. 

This  indirect  allusion  to  animal  psychology  brings  up 
again  the  assumption  that  human  behavior  in  these  civi- 
lized times  is,  with  the  exception  of  a  few  basically  instinc- 
tive reactions,  the  product  of  our  civilized  environment; 
or,  more  specifically,  that  our  liking  for  competition  is  a 
habit  which  each  generation  acquires  by  growing  up  in  an 
atmosphere  of  competition.  We  have  just  seen  that,  even 
if  that  assumption  were  true,  the  difficulty  of  changing 
that  atmosphere  is  considerable.  This  difficulty  might  be 
so  great,  and  the  advantage  to  be  gained  from  it  so  slight, 
as  not  to  be  worth  the  trouble.  If  the  competitive  in- 
stinct or  habit,  as  the  case  may  be,  can  be  harnessed  to 
productivity,  it  might  work  almost  as  well  as  the  opposite 
habit,  that  of  cooperation  unmixed  with  competition.^ 

The  behavior  of  our  subhuman  relatives  seems  to  create 
a  slight  presumption  against  the  assumption  that  our 
liking  for  competition  is  an  acquired  habit  which  can  be 
unlearned.  That  assumption  has  been  based  partly  upon 
a  faulty  deduction  from  Weisman's  theory  of  the  stability 
of  the  germ  plasm.  It  has  been  argued,  for  example,  that 
if  acquired  characters  are  not  transmitted,  then  civilized 
man  is  not  fundamentally  different  from  the  savage;  that 
every  child  born  into  a  civilization  has  to  learn  the  whole 
of  that  civilization  and  can  learn  it  no  more  easily  than 

^  Most  forms  of  successful  cooperation  are  merely  means  by  which  com- 
petition may  be  carried  on  more  successfully.  There  is,  for  example, 
cooperation  among  members  of  a  football  team,  but  this  teamwork  enables 
it  to  compete  more  successfuly  against  the  opposing  team.  The  same  re- 
mark applies  to  a  cooperative  selling  organization. 


THE  COMPETITIVE  SYSTEM  147 

the  child  of  savage  parents,  provided  the  latter  could  be 
given  precisely  the  same  external  stimuli  as  the  former; 
that  our  behavior,  in  so  far  as  It  differs  from  that  of  the 
savage,  Is  wholly  the  product  of  our  civilized  environment. 
This  Is  not  a  necessary  deduction  from  the  assumption  of 
the  non-transmissibility  of  acquired  characters. 

On  the  physical  side,  for  example,  there  can  be  no  ques- 
tion that  considerable  changes  can  be  brought  about  even 
though  somatic  changes  do  not  effect  changes  in  the  germ 
plasm.  Weisman's  historic  experiment  with  mice  demon- 
strated that  one  cannot  produce  tailless  mice  by  the  simple 
method  of  cutting  off  their  tails  for  nineteen  successive 
generations.  It  did  not  prove  that  tailless  mice  might  not 
be  produced  by  some  other  method,  say  by  the  selection  of 
certain  variations  or  certain  mutations.  Dehorning  cattle 
has  probably  never  produced  a  hornless  cow,  but  hornless 
breeds  have,  nevertheless,  been  produced  by  other 
methods.  Painting  faces  never  produced  a  white  or  pink 
breed  of  men;  nevertheless,  we  have  a  white  or  pink  type. 
All  this  Is  perfectly  well  understood  by  every  biologist  to 
be  thoroughly  in  accord  with  Weisman's  general  theory, 
even  though  biologists  are  not  agreed  as  to  the  non- 
transmissibility  of  acquired  characters. 

Whether  mental  qualities  and  aptitudes  come  under  the 
same  law  as  physical  qualities  may  be  open  to  question. 
It  Is  a  question  of  fact  and  not  of  logical  deduction  from 
Weisman's  theory.  Whether  these  mental  aptitudes  have 
their  bases  in  the  brain,  the  Intercostal  muscles,  the  dia- 
phragm, or  the  larynx,  would  not  alter  the  nature  of  the 
problem.     If  certain  physical  changes  can  be  brought 


148  THIS  ECONOMIC  WORLD 

about  by  the  evolutionary  process,  there  is  no  abstract 
reason  why  others  may  not  also  be  brought  about,  and  if 
those  physical  characters  that  are  correlated  with  mental 
qualities  can  be  changed,  there  are  no  deductive  reasons 
why  mental  qualities  might  not  be  changed  with  them. 

That  every  child  born  into  a  civilized  society  must  learn 
the  whole  of  that  civilization  Is,  in  one  sense,  not  only 
true  but  obvious.  At  birth  the  child  knows  nothing. 
Whatever  it  knows  later  in  life  it  must,  therefore,  have 
learned  after  it  was  born.  This,  however,  does  not  in 
itself,  without  a  great  deal  of  inductive  evidence,  mean 
that  the  child  may  not  inherit  certain  qualities  or  aptitudes 
which  make  it  possible  for  him  to  learn  what  civilization 
has  to  teach.  A  young  puppy  probably  knows  as  much  as 
a  young  baby;  at  any  rate,  the  difference  is  not  so  very 
great.  That  does  not  mean,  however,  that  the  pup  may 
learn  subsequently  as  much  or  almost  as  much  as  the  baby. 
Nor  does  the  fact  that  the  child  of  savage  parents  knows 
quite  as  much  as  the  child  of  civilized  parents  prove  deduc- 
tively, without  further  evidence,  that  it  has  the  same  apti- 
tude for  learning  as  the  child  of  civilized  parents.  This 
cannot  be  determined  in  advance.  It  must  be  put  to  the 
empirical  test,  not  in  individual  cases,  but  in  a  number  of 
cases  sufficient  to  establish  statistical  curves  of  variation 
in  intelligence  for  each  of  the  two  races.  Only  then  can 
the  two  races  be  scientifically  compared. 

Meanwhile,  we  have  the  great  principle,  presented  by 
Darwin  and  still  further  emphasized  by  Weisman  and  de 
Vries,  of  adaptation  to  environment  through  selection 
either  of  ordinary  variations  or  of  mutations,  preserving 


THE  COMPETITIVE  SYSTEM  149 

those  that  fit  into  the  environment  well  enough  to  survive, 
and  extinguishing  those  which  do  not.  Even  if  human 
beings  had  originally  lacked  all  interest  in  competition, 
even  though  they  originally  were  bored  rather  than  ex- 
hilarated by  the  sight  of  competition  as  well  as  by  stories 
about  it,  it  is  at  least  conceivable  that  the  process  of  selec- 
tion would  eventually  have  bred  up  a  race  whose  heredi- 
tary nature  was  such  as  to  be  satisfied  by  nothing  else.  If 
for  many  generations  survival  was  largely  a  matter  of 
fighting,  they  who  fought  with  zest  and  enthusiasm  might 
be  expected  to  fight  somewhat  more  effectively  than  those 
who  fought  with  a  feeling  of  indifference  or  disgust  for 
the  whole  business.  This  selective  tendency  alone,  if  kept 
up  for  thousands  of  generations,  might  be  expected  to  re- 
sult in  a  race  whose  interest  in  fighting  was  too  deep- 
seated  to  be  eradicated  in  a  single  generation  by  the  simple 
device  of  avoiding  the  experience  of  competition.  It 
would  probably  require  another  thousand  generations  of 
selection  of  the  opposite  sort  to  eradicate  all  interest  in 
competition. 

All  this  tends  to  strengthen  the  argument  in  favor  of 
the  proposition  that  it  is  probably  better  on  the  whole  to 
try  to  direct  the  competitive  spirit,  however  it  was  ac- 
quired, into  productive  channels,  making  competition  so 
far  as  possible  into  a  rivalry  in  production  or  the  perform- 
ance of  service,  eliminating  so  far  as  possible  all  its 
destructive  and  deceptive  forms,  than  to  try  to  eliminate 
the  competitive  tendencies  from  human  nature.  To  do 
the  opposite  would  seem  a  little  like  advising  the  giraffe  to 
learn  to  eat  grass  rather  than  to  continue  browsing  on  the 


ISO  THIS  ECONOMIC  WORLD 

leaves  of  the  mimosa  tree,  which  is  a  kind  of  glorified 
alfalfa — on  the  theory  that  if  it  continued  living  on  grass 
for  a  long  enough  time,  nature  would  shorten  its  neclc  and 
front  legs  and  otherwise  readjust  its  anatomy  so  as  to 
make  it  as  easy  to  eat  grass  as  it  is  now  to  eat  mimosa 
leaves.  Nature's  process  of  modification  is  a  slow  and 
painful  one.  It  may  be  cheaper  and  more  satisfactory  to 
proceed  along  the  line  of  our  past  development  than  to 
try  to  reverse  the  whole  process  and  attempt  to  move  in 
an  opposite  direction. 

But  what  is  economic  competition?  It  is  not,  to  begin 
with,  the  brutal  and  unmitigated  struggle  for  existence,  as 
that  struggle  is  carried  on  among  plants  and  animals. 
Among  the  many  things  that  can  be  said  about  civilized 
man  is  that  he  is  the  standard-setting  animal.  It  is  only 
among  civihzed  men  that  such  a  thing  as  a  standard  of 
living,  a  standard  of  moral  behavior,  a  standard  of  com- 
petition, can  be  said  to  exist.  Where  a  standard  exists, 
it  merely  means  that  there  are  some  things  that  are  not 
done  that  would  be  done  in  the  absence  of  such  a  standard 
of  conduct. 

Animals  do  not  commit  crime,  yet  they  do  everything 
that  human  criminals  do.  The  reason  they  do  not  com- 
mit crime  is  not  that  their  acts  are  essentially  different 
from  those  of  human  criminals,  but  that  they  have  no 
standards  by  which  to  test  the  moral  quality  of  their  acts. 
Anyone  is  called  a  criminal  in  human  society  who  does 
something  which  falls  far  enough  below  the  standards  of 
the  society  to  which  he  belongs  to  evoke  the  strong  con- 
demnation of  that  society.     If  the  standards  rise  rapidly, 


THE  COMPETITIVE  SYSTEM  151 

or  become  more  and  more  severe,  there  will  appear  to  be 
an  increase  in  crime,  even  though  human  conduct  has  not 
grown  absolutely  worse.  The  prohibitory  law  makes 
crimes  of  acts  which  formerly  were  not  called  crimes. 
Moreover,  animals  do  not  commit  sin,  though  they  do 
everything  that  sinners  do.  Even  where  the  criminal  law 
has  not  specifically  forbidden  an  act,  the  moral  sense  of 
the  community  may  condemn  it,  and  it  thereby  becomes  a 
sin,  in  name  at  least. 

Why  there  should  be  standards  of  human  conduct  is 
one  of  the  most  important  of  all  questions  in  sociology. 
There  is  abroad  a  kind  of  intellectual  nihilism  which  main- 
tains the  proposition  that  nothing  is  really  or  absolutely 
right  or  wrong,  but  that  certain  acts  are  called  right  and 
others  wrong  merely  because  someone  invented  the  notion. 
Some  even  go  so  far  as  to  reject  all  standards  of  conduct 
and  leave  human  beings  to  behave  according  to  their  own 
impulses.  This  would  undoubtedly  eliminate  crime  in  the 
technical  sense,  though  there  is  no  reason  to  think  that  it 
would  improve  human  conduct.  We  would  merely  get 
rid  of  crime  by  ceasing  to  call  anything  by  that  name. 
Apologists  for  sovietism  assert,  for  example,  that  there  is 
no  prostitution  in  Russia.  They  do  not  assert,  however, 
that  sexual  relations  are  any  less  loose  than  they  were 
before  sovietism  began  to  call  things  by  different  names. 

So  long  as  we  restrict  our  discussion  to  the  field  of 
logomachy,  or  so  long  as  disputants  do  nothing  but  juggle 
with  words,  it  is  not  easy  to  reach  a  sensible  conclusion  on 
the  question  of  the  social  value  of  standards  of  conduct. 
We  may  cut  the  Gordian  knot  of  all  such  futile  discussions 


152  THIS  ECONOMIC  WORLD 

by  assuming  a  case  of  two  rival  communities,  equally  for- 
tunate in  the  possession  of  physical  resources,  but  differing 
on  the  question  of  standards  of  conduct.  In  one  of  these 
rival  communities,  let  us  assume  that  there  arc  rather 
severe  standards  of  conduct,  enforced  by  the  will  of  the 
community.  Let  us  assume  also  that  these  standards  are 
so  clear-cut  and  their  enforcement  is  so  rigid  that  no 
person  can  ever  succeed  in  getting  what  he  wants  either 
by  violence  or  deception.  If  he  wants  anything  he  must 
get  it  either  by  producing  it  himself  or  by  inducing  some- 
one else  to  give  it  to  him  gladly  and  freely;  that  is,  either 
as  a  gift  or  in  exchange  for  something  which  the  other 
person  would  rather  have  than  the  thing  he  is  asked  to 
give  up.  In  this  community,  which  we  shall  call  Com- 
munity A,  no  energy  is  wasted  in  destructive  or  deceptive 
effort.  Since  everyone  is  compelled  to  get  what  he  wants, 
if  he  gets  it  at  all,  by  productive  effort,  there  will  be  a 
great  deal  of  productive  effort  put  forth,  and  consequently 
a  great  deal  of  production. 

In  the  other  community,  which  we  shall  call  Community 
B,  there  are  no  standards  at  all.  Violence  is  permitted  if 
it  can  be  organized  on  a  scale  sufficiently  large  to  be  suc- 
cessful. Deception  and  fraud  are  means  of  getting  what 
the  Individual  wants  if  he  is  sufficiently  skillful  in  the  arts 
of  deception  and  fraud.  This  community  would  be,  in 
respect  to  the  absence  of  standards,  precisely  like  any  ani- 
mal community.  The  Individual  who  is  not  strong 
enough,  or  who  cannot  combine  with  a  large  enough  num- 
ber of  other  individuals,  to  succeed  by  violence  or  fraud 
would,  of  course,  be  compelled  to  get  his  living — if  he  got 


THE  COMPETITIVE  SYSTEM  153 

it  at  all — by  producing  it.  The  same  necessity  would  be 
upon  those  who  are  not  shrewd  enough  to  succeed  by  the 
arts  of  deception  and  fraud.  The  strongest  and  the  most 
cunning  would  find  opportunities  for  prosperity  by  destruc- 
tive and  deceptive  methods.  A  great  deal  of  the  man 
power  of  the  community  would  therefore  be  wasted  in 
this  kind  of  effort. 

Which  of  the  two  communities  would  probably  grow 
more  rapidly  in  numbers,  prosperity,  and  power?  There 
is  not  much  doubt  that  the  community  that  set  and  en- 
forced the  severe  standards  described  above  would  be 
more  successful  than  the  other  and  would  eventually  be 
able  to  exterminate  the  other  as  an  obnoxious  nest  of 
thieves  and  scoundrels.  It  would  probably  justify  itself 
in  doing  so  on  the  ground  that  an  inferior,  unprofitable, 
or  unproductiv^e  community  was  occupying  good  land  or 
cumbering  the  ground  like  the  barren  fig  tree.  If  Com- 
munity B  survived  at  all,  it  would  be  because  of  the  moral 
self-restraint  of  the  more  successful  rival  community. 
Community  A  would  have  an  abundance  of  surplus  power 
with  which  to  exterminate  Community  B  if  it  cared  to  do 
so.  Community  B  would  owe  its  continued  existence — if 
it  continued  to  exist  at  all — to  the  moral  self-restraint  of 
Community  A. 

The  inference  is  clear  that  standards  of  conduct  en- 
forced by  the  community  may  be  powerful  agencies  for 
economizing  human  energy — that  is,  for  getting  all  the 
man  power  of  the  community  to  work  in  productive  chan- 
nels; on  the  other  hand,  the  absence  of  standards  will 
permit  a  good  deal  of  man  power  to  waste  itself  in  un- 


154  THIS  ECONOMIC  WORLD 

productive  or  destructive  channels.  With  equal  natural 
resources,  the  community  that  economizes  Its  man  power 
most  successfully  will  be  the  successful  community.  That 
is,  it  will  grow  in  numbers,  prosperity,  power,  and  all  that 
goes  with  civilization  much  more  rapidly  than  the  com- 
munity that  wastes  a  great  deal  of  Its  man  power. 

It  is  also  true  that  a  community  may  have  false  stand- 
ards— that  is,  it  may  Insist  on  kinds  of  conduct  that  are 
not  productive  of  anything,  and  may  tolerate  forms  of 
conduct  which  are  destructive.  In  such  a  case,  the  pos- 
session of  these  irrational  standards  Is  a  handicap  rather 
than  a  help. 

An  analysis  of  the  standards  actually  enforced  among 
various  tribes  and  peoples  will  convince  anyone  that  there 
are  many  false  and  irrational  standards  in  existence.  It 
is  probably  no  accident  that  these  false  and  irrational 
standards  are  more  conspicuous  among  the  tribes  that 
have  never  made  much  of  a  success — that  is,  that  have 
never  produced  enough  to  support  large  numbers  or  to 
support  them  well.  It  has  never  built  anything  above 
ground  that  can  be  brought  under  the  general  name  of 
civilization.  A  student  who  sees  nothing  in  the  standard- 
ization of  conduct  except  these  rather  numerous,  false, 
and  irrational  standards  may,  if  he  is  himself  somewhat 
Irrational  and  impulsive,  jump  to  the  conclusion  that  all 
standards  are  a  handicap,  and  become  an  intellectual 
nihilist.  His  conclusion  would  be  about  as  rational  as 
that  of  one  who  found  that  some  foods  were  unwhole- 
some and  would  therefore  condemn  all  food. 

The  test  by  which  to  distinguish  a  rational  from  an 


THE  COMPETITIVE  SYSTEM  155 

irrational  standard  of  conduct  is  the  test  of  economy. 
Does  the  standard  result  in  a  greater  economy  of  human 
energy  or  of  the  working  power  of  its  people,  or  does  it 
not?  If  it  does,  it  is  a  factor  in  progress;  if  not,  it  is  a 
hindrance  to  progress.  On  the  basis  of  this  general  prin- 
ciple, one  might  almost  conclude  without  specific  examina- 
tion of  the  facts  that  any  tribe  that  has  failed  to  make  a 
success  of  its  tribal  life,  that  is,  one  that  has  never  been 
able  to  support  large  numbers  and  to  support  them  well, 
or  to  build  any  of  the  outward  evidences  of  civilization, 
either  has  no  standards  at  all  or  has  inefficient  or  irra- 
tional standards.  It  is  perfectly  certain  that  it  has  not 
economized  its  man  power  and  applied  it  effectively  to 
rational  ends.  The  only  general  reason  that  could  be 
given  for  its  failure  to  economize  its  man  power  would  be 
the  absence  of  sound  and  rational  standards  of  conduct 
enforced  by  the  tribe  upon  its  individuals. 

On  the  other  hand,  any  tribe  or  nation  that  has  made  a 
conspicuous  success  of  its  tribal  or  national  life,  that  is, 
one  that  has  succeeded,  over  long  periods  of  time,  in  pro- 
ducing enough  to  support  large  numbers  and  to  support 
them  well  and  in  building  the  outward  evidences  of  civil- 
ization, could  have  done  so  only  by  reason  of  the  fact 
that  it  has  economized  its  man  power  and  applied  it  effec- 
tively to  rational  ends  and  purposes.  The  only  general 
reason  that  could  be  given  for  this  is  that  its  standards  of 
conduct  have  been,  on  the  whole,  sound  and  rational. 
Whether  the  standards  were  enforced  by  criminal  law  or 
merely  by  the  moral  opinion  of  the  people  at  large,  it  is 
pretty  certain  that  the  standards  must  have  existed.    This 


156  THIS  ECONOMIC  WORLD 

would  not  preclude  the  possibility  that  there  were  many 
items  in  the  moral  code  of  such  a  nation  that  were  still 
lacking  in  soundness  or  rationality;  but  the  presumption 
is  in  favor  of  Its  soundness  as  a  general  or  average  fact. 
In  a  country  that  has  succeeded  as  well  as  have  most  of 
the  countries  of  northwestern  Europe  and  their  colonies 
in  America,  one  should  think  twice  before  undertaking  a 
general  condemnation  of  the  standards  of  conduct  ac- 
cepted and  enforced  in  these  countries.  They  must,  on 
the  whole,  have  been  fairly  sound  according  to  the  test 
which  we  are  here  discussing;  that  is,  they  must  have  re- 
sulted in  a  fair  degree  of  economy  of  the  man  power  of 
these  peoples. 

Furthermore,  if  these  standards  should  follow  the  prin- 
ciple already  suggested,  wherever  a  rule  of  conduct  is  en- 
forced that  can  be  shown  to  be  wasteful  of  man  power  or 
even  to  fail  to  economize  man  power  and  apply  it  ra- 
tionally, that  rule  should  be  repudiated  or  ignored  as  soon 
as  the  mind  of  the  general  community  can  be  changed. 
If  there  is  any  new  rule  of  conduct  which,  when  enforced, 
would  result  in  greater  economy  of  man  power,  that  rule 
should  be  adopted  and  enforced  as  soon  as  the  mind  of  the 
community  can  be  made  up.  This  indicates  the  general 
direction  in  which  moral  reforms  must  proceed  if  they  are 
to  be  successful  in  the  larger  sense — not  in  the  short- 
sighted or  demagogic  sense. 

The  difference  between  demagogic  success  and  real  suc- 
cess is  now  fairly  clear.  A  given  group  of  agitators 
may  succeed  in  persuading  the  community  to  adopt  a  new 
rule  or  standard  and  think  that  they  have  succeeded.    The 


THE  COMPETITIVE  SYSTEM  157 

real  test,  however,  is  yet  to  be  applied.  How  will  it  work 
after  it  is  adopted?  Will  it  economize  the  man  power 
and  enable  the  community  to  support  more  people  and 
support  them  better,  or  will  it  not?  If  so,  It  will  prove  a 
real  and  final  success;  if  not,  the  community  that  has  fol- 
lowed the  demagogic  leaders  handicaps  itself  and  will 
therefore  waste  more  rather  than  less  of  its  man  power 
and  will  support  fewer  people,  or  will  not  support  them 
so  well.     In  short,  it  will  decline  in  civilization. 

One  of  the  most  vivid  pictures  of  the  unmitigated 
struggle  carried  on  among  the  lower  forms  of  life  Is  found 
in  Robert  Louis  Stevenson's  "The  Woodman."  He  pic- 
tures the  intense  struggle  among  the  plants  in  the  dense 
vegetation  of  the  tropical  jungle. 

Thick  'round  me  in  the  teeming  mud 
Briar  and  fern  strove  to  the  blood. 
The  hooked  liana  in  his  gin 
Noosed  his  reluctant  neighbors  in: 
There  the  green  murderer  throve  and  spread, 
Upon  his  smothering  victims  fed, 
And  wantoned  on  his  climbing  coil. 
Contending  roots  fought  for  the  soil 
Like  frightened  demons:  with  despair 
Competing  branches  pushed  for  air. 
Green  conquerors  from  overhead 
Bestrode  the  bodies  of  their  dead : 

So  hushed  the  woodland  warfare  goes 
Unceasing;  and  the  silent  foes 
Grapple  and  smother,  strain  and  clasp 
Without  a  cry,  without  a  gasp. 

An  analysis  of  the  struggle  for  existence  as  It  is  carried 
on  where  no  standards  of  conduct  prevail  shows  that  there 


158  THIS  ECONOMIC  WORLD 

are  four  distinct  methods  by  means  of  which  creatures 
struggle  for  advantage.  These  methods  may  be  described 
by  the  four  words :  destructive,  deceptive,  persuasive,  pro- 
ductive. 

By  destructive  methods  are  meant  all  those  whereby 
one  succeeds  by  virtue  of  one's  power  to  kill,  to  hurt,  or  to 
inspire  fear  of  physical  injury  or  pain.  "War,"  "rob- 
bery," "dueling,"  "sabotage,"  and  "brawling"  are  names 
for  methods  of  destruction  as  carried  on  by  human  be- 
ings; but  it  must  be  remembered  that  animals  also  kill, 
rob,  inflict  injury,  and  inspire  terror. 

By  the  deceptive  methods  are  meant  all  those  by  which 
one  succeeds  by  virtue  of  one's  power  to  deceive,  to 
swindle,  or  to  cheat.  Animals  practice  deceit,  though  we 
do  not  call  their  forms  of  deceit  by  such  names  as  "swin- 
dling," "counterfeiting,"  "adulteration  of  goods,"  and  the 
hke. 

By  the  persuasive  methods  are  meant  all  those  methods 
whereby  one  succeeds  by  virtue  of  one's  power  to  persuade 
or  to  convince.  One  may  beat  one's  rival  by  being  a  more 
persuasive  talker,  whether  one  is  striving  for  favors  from 
the  sovereign  person  or  from  the  sovereign  people, 
whether  one  is  striving  for  the  hand  of  a  lady,  the  decision 
of  a  jury,  or  the  trade  of  a  possible  customer.  This  form 
of  conflict  would  remain  even  if  we  could  eliminate  all 
other  forms.  Even  under  the  most  complete  form  of 
communism  there  would  remain  abundant  room  for  the 
persuasive  forms  of  conflict. 

By  the  productive  methods  are  meant  all  those  methods 
whereby  one  may  beat  one's  rivals,  or  gain  advantages,  by 


THE  COMPETITIVE  SYSTEM  159 

virtue  of  one's  power  to  produce,  to  serve,  or  to  confer 
benefit. 

The  same  persons  may  resort  to  more  than  one  of  these 
methods  in  order  to  gain  an  advantage.  When  two  farm- 
ers compete  in  growing  crops,  they  are  struggling  for  ex- 
istence, or  for  economic  advantage,  by  a  productive 
method.  When  they  quarrel  over  a  line  fence  and  take 
their  quarrel  before  a  court  for  adjudication,  they  are 
struggling  by  a  persuasive  method.  When  they  secretly 
alter  or  remove  landmarks  in  order  to  gain  an  advantage 
in  their  litigation  or  when  they  bribe  jurors,  they  are 
struggling  by  a  deceptive  method.  When  they  fall  to 
fighting  either  with  fists  or  with  weapons,  they  are  strug- 
gling by  a  destructive  method.  When  they  change  their 
methods  in  the  order  just  described,  they  are  sinking  lower 
and  lower  in  the  scale;  that  is,  they  are  resorting  to  worse 
and  worse  methods  of  struggling  for  existence  or  advan- 
tage. When  they  rival  one  another  in  growing  corn,  there 
is  more  corn  grown;  the  country  is  better  fed  and  every- 
one is  better  off,  except  possibly  the  one  who  is  beaten,  and 
even  he  may  very  likely  be  better  off  than  he  would  have 
been  ?f  he  had  not  competed  at  all.  When  two  farmers 
quarrel  over  a  line  fence  and  take  the  case  into  court,  no 
one  gains  any  benefit  except  the  lawyers,  and  what  the 
lawyers  gain  the  litigants  lose.  No  new  land  is  created 
by  that  conflict.  No  new  wealth  is  produced.  The  com- 
munity is  no  better  fed,  and  the  litigants  have  wasted  their 
time.  To  change  from  persuasion  to  deception  or  from 
deception  to  physical  force  is  so  clearly  to  sink  to  a  lower 
level  that  it  is  unnecessary  to  pursue  the  topic  further. 


i6o  THIS  ECONOMIC  WORLD 

It  will  be  apparent  to  anyone  who  will  study  the  prob- 
lem that  among  animals  the  destructive  and  deceptive 
methods  are  the  characteristic  forms  of  struggle.  They 
kill,  maim,  injure,  rob,  and  deceive  one  another  with  no 
moral  or  legal  restraints.  They  may  sometimes  rise  to 
the  level  of  persuasion,  as  in  the  courting  process,  but 
never  to  the  level  of  production;  that  is,  no  animal  ever 
tries  to  beat  its  rival  by  producing  a  larger  or  better  prod- 
uct or  rendering  a  greater  or  better  service.  Among 
human  beings  who  have  no  moral  sense  and  who  are  unre- 
strained by  law  and  justice,  the  destructive  and  deceptive 
methods  of  struggle  will  be  followed  as  well  as  the  per- 
suasive and  productive  methods,  but  the  destructive  and 
deceptive  methods  of  struggle  are  precisely  the  things  that 
morals  and  laws  are  designed  to  prevent.  In  any  civiliza- 
tion worthy  of  the  name  and  under  any  government 
worthy  to  stand  overnight,  men  are  actually  restrained,  by 
their  own  moral  feelings,  by  respect  for  the  good  opinions 
of  their  fellows,  and  by  fear  of  legal  penalties,  from  at- 
tempting to  promote  their  own  interests  by  destruction  or 
deception. 

Where  this  high  standard  of  competition  is  actually 
achieved,  competitive  production  becomes  virtually  riv- 
alry in  the  performance  of  service.  Under  this  rigid 
standard  Adam  Smith's  dictum  regarding  the  invisible 
hand  tends  to  become  true.  That  is,  men  are  led  as  by  an 
invisible  hand  to  promote  the  public  good  while  trying  to 
promote  their  own.  Be  it  understood,  however,  that  this 
desirable  result  does  not  follow  from  any  universal  har- 
mony of  human  interests.    It  is  achieved  only  when  and 


THE  COMPETITIVE  SYSTEM  i6i 

because  rigid  standards  are  imposed  by  law,  by  custom, 
by  the  desire  for  social  esteem,  and  by  the  individual's 
own  sense  of  propriety  regarding  his  conduct. 

But  what  is  the  principle  of  justice  that  is  to  be  found 
somewhere  in  the  center  of  this  vast  economic  system,  that 
seems  to  present  to  the  outward  eye  so  many  conflicts,  dis- 
cordances, and  individual  cases  of  hardship?  Stated  in 
its  most  abstract  and  general  terms,  the  principle  is  simply 
this :  Let  everyone  prosper  in  exact  proportion  as  he  con- 
tributes to  the  prosperity  of  others.  A  Great  Teacher 
once  voiced  the  same  principle — "He  that  would  be  great 
among  you,  let  him  be  your  servant."  It  is  merely  the 
principle  that  each  one  should  earn  what  he  gets.  He 
that  would  be  great,  either  in  wealth,  in  popularity,  or  in 
political  power,  must  earn  his  greatness  by  serving  or  by 
contributing  to  the  well-being  of  others.  In  this  pro- 
nouncement of  the  Great  Teacher  there  was  no  hint  of 
condemnation  of  the  desire  to  be  great  or  successful. 
That  desire  seems  to  have  been  accepted  or  implied  in  the 
very  words,  "He  that  would  be  great."  The  one  limita- 
tion was,  however,  that  greatness,  whether  of  wealth, 
popularity,  or  power,  must  be  earned  and  not  acquired  in 
any  other  way. 

The  proposition,  let  every  one  prosper  In  exact  propor- 
tion as  he  contributes  to  the  prosperity  of  others,  is  un- 
doubtedly sound  in  principle  but  difficult  to  apply  in  the 
concrete.  It  is  sound  in  principle  for  the  reason  that  it 
works  in  practice.  Any  society  or  any  nation  that  adopts 
this  principle  as  its  ultimate  ideal  of  economic  justice  and 
that  succeeds,  in  some  degree,  in  realizing  it  in  practice 


i62  THIS  ECONOMIC  WORLD 

has  the  surest  possible  guaranty  of  greatness.  This  is  the 
surest  possible  way  of  harnessing  human  energy  to  the 
social  good — by  appealing  to  the  strongest  possible  human 
motive.  The  social  group,  whether  large  or  small,  that 
serves  notice  upon  each  citizen  that  his  prosperity  is  to  be 
limited  only  by  the  amount  which  he  contributes  to  the 
prosperity  of  the  whole  will  have  found  the  surest  means 
of  inducing  every  one  of  its  citizens  to  go  about  literally 
doing  good — not  being  good  in  any  subjective,  psycho- 
logical sense,  but  doing  good  in  an  objective,  measurable 
sense.  Under  this  rule  of  justice,  even  the  selfish  man 
will  be  induced  to  behave  very  much  as  he  would  behave 
if  he  were  wholly  benevolent. 

It  is  necessary,  in  following  this  analysis,  to  differen- 
tiate sharply  between  subjective  motives  and  objective 
conduct.  Something  is  to  be  said  In  favor  of  securing  de- 
sirable objective  conduct  even  from  men  whose  motives 
are  somewhat  self-centered.  The  bread  which  you  eat 
contains  as  many  calories  and  is  probably,  on  the  whole, 
as  satisfactory  to  you  when  the  wheat  of  which  it  is  made 
was  grown  for  profit  as  it  would  be  if  it  were  grown  for 
benevolence.  Until  we  can  usher  in  the  reign  of  universal 
benevolence,  the  next  best  thing  Is  to  get  unbenevolent 
men  to  act  precisely  as  they  would  act  if  they  were  be- 
nevolent. This  is  really  the  purpose  of  a  sound  principle 
of  justice.  The  policy  of  permitting  every  one  to  prosper 
in  exact  proportion  as  he  contributes  to  the  prosperity  of 
others  tends  to  accomplish  that  end.     It  is,  therefore,  just. 

But  it  is  difficult  to  apply  in  the  concrete.  Centuries  of 
progress  based  upon  study  and  careful  adjudication  of  dis- 


THE  COMPETITIVE  SYSTEM  163 

putes  have  been  necessary  to  bring  us  even  to  the  present 
imperfect  realization  of  that  ideal.  It  will  doubtless  take 
centuries  more  to  approach  perceptibly  nearer  to  that 
ideal. 

An  immediate  and  practical  question  Is,  Who  shall  de- 
termine how  much  the  individual  contributes  to  the  pros- 
perity of  other  people?  An  omniscient  and  omnipotent 
ruler  might  do  this  accurately.  In  the  absence  of  such 
omniscience  it  must  be  done  by  powers  with  limited  intelli- 
gence. In  a  democracy  it  seems  that  we  shall  be  com- 
pelled to  leave  the  evaluation  of  the  individual  service  to 
those  other  individuals  who  receive  the  service.  If  what 
you  do  Is  worth  anything,  it  is  worth  that  something  to 
somebody.  The  one  who  receives  your  service  may  be 
very  stupid  and  incapable  of  placing  a  proper  evaluation 
upon  it,  but  it  would  be  difficult  to  find  anyone  else  who 
would  be  In  a  better  position  than  he  to  evaluate  your 
work.  While,  therefore,  as  an  abstract  proposition  the 
rule,  Let  everyone  prosper  in  exact  proportion  as  he  con- 
tributes to  the  prosperity  of  others,  is  absolutely  sound, 
as  a  working  proposition  it  has  to  be  modified  so  as  to 
read  somewhat  as  follows :  Let  everyone  prosper  In  pro- 
portion as  he  can  persuade  somebody  else  to  appreciate 
or  desire  his  service. 

Under  a  despotism  the  effort  to  secure  appreciation  of 
one's  service  is  very  likely  to  take  the  form  of  hanging 
about  the  court  of  the  sovereign  person.  In  a  democracy 
it  may  take  the  form  of  political  demagogy,  of  salesman- 
ship, of  advertising,  and  various  other  methods  of  creat- 
ing appreciation  of  what  one  has  to  contribute.     If  In  a 


i64  THIS  ECONOMIC  WORLD 

despotism  the  despot  were  stupid,  the  real  contribution  of 
the  individual  might  be  underappreciated,  and  even  harm- 
ful acts  might  be  highly  appreciated  and  rewarded;  but 
under  a  despotism  there  is  no  higher  court  of  appeal  from 
which  to  secure  a  reversal  of  this  practical  judgment. 
Under  a  democracy,  likewise,  if  the  democracy  is  stupid, 
the  same  unfortunate  results  are  certain  to  happen.  So 
long  as  democracy  lasts  and  so  long  as  it  remains  stupid, 
there  will  be  no  higher  court  of  appeal  from  which  to  get 
practical  judgments.  The  nearest  practical  approxima- 
tion to  the  ideal  of  abstract  justice  is  simply  this :  Every- 
one shall  prosper  in  proportion  as  he  can  persuade  others 
to  appreciate  and  pay  for  his  contribution  to  their  pros- 
perity. 

Still  other  qualifications  are  necessary.  Even  though 
the  abstract  principle  of  justice  were  fully  realized,  there 
might  still  be  a  great  deal  of  poverty.  If  everyone  actu- 
ally prospered  in  exact  proportion  as  he  contributed  to 
the  prosperity  of  others,  considerable  numbers  might  be 
found  in  a  position  in  which  they  could  make  very  slight 
contributions  to  the  general  prosperity.  In  such  cases 
their  rewards  would  be  very  slight,  and  they  would  conse- 
quently be  very  poor.  In  this  interlocking  civilization  of 
ours,  where  we  are  all  mutually  dependent  upon  one  an- 
other, there  is  always  the  possibility  of  things  being  thrown 
out  of  balance.  There  might  be,  to  take  a  concrete  illus- 
tration, more  hodcarriers  in  a  community  than  were 
needed  to  wait  upon  the  limited  number  of  masons  to  be 
found  there.  Under  such  a  condition  as  this,  the  contri- 
bution of  the  individual  hodcarrier  would  be  very  slight, 


THE  COMPETITIVE  SYSTEM  165 

as  determined  by  the  following  acid  test.  Let  him  emi- 
grate from  that  community  or  let  him  stop  working. 
How  much  less  building  could  be  done  as  the  result  of  his 
emigration  or  of  his  refusal  to  work?  Very  little  less,  be- 
cause there  would  still  be  plenty  of  hodcarriers  to  wait 
upon  the  existing  number  of  masons.  Building  operations 
could  go  on  without  a  flurry  or  a  ripple.  Or  let  an  addi- 
tional hodcarrier  come  to  this  community  and  seek  work. 
No  perceptible  acceleration  of  the  rate  of  building  would 
follow,  for  the  reason  that  there  were  already  as  many 
hodcarriers  as  could  be  used  in  combination  with  the 
limited  number  of  masons.  Under  such  conditions,  hod- 
carriefrs  would  necessarily  be  poor.  Some  of  them  would 
either  be  unemployed  and  therefore  poor,  or  all  of  them 
would  receive  very  low  wages.  At  the  same  time.  If 
masons  were  scarce,  every  individual  mason  would  count 
in  the  building  operations  of  that  community.  If  one 
should  stop  working,  building  operations  would  slow 
down.  If  another  should  come  to  the  community,  build- 
ing operations  would  accelerate.  The  individual  mason's 
contribution  to  the  housing  and  shelter  of  that  community 
would  be  positive  and  his  reward  would  be  ample.  So 
under  these  conditions,  even  though  both  masons  and 
hodcarriers  received  exactly  what  they  were  worth  or 
prospered  In  exact  proportion  to  their  individual  contribu- 
tions to  the  prosperity  of  the  whole  community,  hod- 
carriers would  be  unprosperous  and  masons  at  least  rela- 
tively prosperous. 

This  will  illustrate  the  need  for  another  qualification, 
or  perhaps  a  supplementary  principle,  to  relieve  some  pos- 


x66  THIS  ECONOMIC  WORLD 

sible  hardships  that  might  follow  from  the  rigid  applica- 
tion of  the  general  abstract  principle  above  named. 

Let  everyone  have  the  best  possible  opportunity  for  ac- 
quiring skill  and  ability,  in  order  that  he  may  make  the 
largest  possible  contribution  to  the  prosperity  of  the 
whole  community.  This  would  go  a  long  way  toward  cor- 
recting the  difficulties  that  might  grow  out  of  the  strict 
application  of  the  first  abstract  principle  of  justice.  If 
every  young  person  growing  up  had  been  given  ample 
opportunities  for  acquiring  such  education  and  skill  as 
his  native  ability  would  permit  him  to  acquire,  there  could 
have  been  no  such  overcrowding  of  the  occupation  of  hod- 
carrier  and  undercrowding  of  the  occupation  of  mason  as 
that  described  in  the  above  illustration.  But  where  op- 
portunities for  education  and  training  are  limited,  where 
young  men  grow  up  with  no  opportunity  to  learn  to  do 
anything  except  what  they  can  learn  from  their  fathers,  it 
is  quite  certain  that  some  occupations  will  be  overcrowded 
and  others  undercrowded.  Where  this  happens,  there 
will  be  great  differences  of  riches  and  poverty  even  where 
the  first  abstract  principle  of  justice  is  enforced.  But  if 
any  country  can  achieve  both  results,  can  lay  down  and 
enforce,  first,  the  general  rule  that  everyone  should  pros- 
per in  exact  proportion  as  he  contributed  to  the  prosperity 
of  the  whole,  and  second,  that  everyone  should  have  the 
best  possible  opportunities  for  training  himself  to  make 
his  maximum  contribution  to  that  general  prosperity,  two 
results  are  absolutely  certain  to  follow.  First,  there  will 
be  a  great  deal  of  general  prosperity.  Second,  that  gen- 
eral prosperity  will  be  widely  diffused  among  all  classes 


THE  COMPETITIVE  SYSTEM  167 

and  occupations.  There  will  be  no  congested  occupations 
with  their  accompaniments  of  unemployment  and  low 
wages.  The  oncoming  stream  of  youth,  being  well  and 
widely  trained  in  a  system  of  universal  and  popular  educa- 
tion, will  naturally  avoid  every  occupation  that  shows 
signs  of  being  congested  and  poorly  paid  and  will  seek 
those  other  occupations  that  show  signs  of  being  depleted 
and  well  paid.  This  will  automatically  preserve  a  bal- 
ance among  occupations  and  tend  toward  the  equalization 
of  prosperity  among  them.  What  constitutes  equality 
will  be  discussed  in  a  later  chapter. 


o 


V 


THE  BALANCE  BETWEEN  LIBERTY 
AND  AUTHORITY 

F  THE  various  names  that  have  been  used  to  de- 
scribe our  economic  system,  that  of  economic  vol- 
untarism is  probably  the  most  accurate.  It  implies, 
among  other  things,  what  Sir  Henry  Maine  called  the 
reign  of  contract  rather  than  that  of  status,  or  that  the 
individual  more  and  more  does  what  he  agrees  to  do 
rather  than  what  he  is  commanded  to  do  by  some  person, 
law,  or  long-standing  custom.  It  implies,  moreover,  that 
he  is  led  to  make  his  agreements  by  a  lure  rather  than  by  a 
prod,  by  the  hope  of  a  positive  good  rather  than  by  the 
fear  of  a  positive  harm,  by  a  reward  rather  than  by  a 
punishment.  Those  who  persist  in  saying  that  there  is  no 
difference  here  will  be  answered  later. 

Of  the  other  names  that  have  been  used  to  describe  our 
present  economic  system,  individualism  is  probably  the 
best  known.  Properly  understood,  this  name  is  accurate 
enough,  but  it  is  so  easily  misinterpreted  and  misapplied 
as  to  make  it  a  misleading  term.  The  vastness  of  our 
numbers,  the  intricate  complexity  of  our  organization, 
and  the  large  scale  on  which  many  enterprises  are  admin- 
istered make  it  seem,  at  times,  as  if  there  were  very  little 
individualism — that  is,  individualism  of  a  special  kind — 

i68 


LIBERTY  AND  AUTHORITY  169 

left  in  this  modern  world.  Certainly,  not  many  of  us  can 
stalk  independently  through  organized  society,  turning 
neither  to  the  right  or  to  the  left,  like  a  hoodlum  in  a 
crowded  street.  Everything  we  do,  from  moving  through 
the  streets  to  writing  a  book,  must  be  done  with  a  great 
deal  of  regard  for  the  feelings,  prejudices,  and  whims  of 
other  people,  to  say  nothing  of  traffic  policemen,  conven- 
tional ideas  of  decency,  and  copyright  laws.  In  fact,  some 
of  our  social  rebels  base  their  objection  to  our  economic 
system  on  the  ground  that  there  Is  very  little  individual- 
ism left. 

Of  course,  the  general  change  from  status  to  contract  is, 
in  another  sense,  a  change  toward  individualism  and  away 
from  institutionalism.  Status  itself  is  a  kind  of  rigid  insti- 
tutionalism  under  which  individuals  and  their  own  desires 
and  capacities  count  for  little  and  rigid  customs  for  much. 
Contract,  even  though  it  be  considered  only  as  another 
kind  of  institution,  is  at  least  a  more  flexible  one,  which 
permits  the  preferences  and  capacities  of  individuals  a 
somewhat  freer  expression  than  was  possible  under  a  law 
of  status.  In  that  sense  and  in  that  sense  alone  is  our 
present  economic  system  individualistic.  However,  even 
this  characteristic  of  our  system  is  quite  as  accurately  de- 
scribed by  the  word  "voluntarism"  as  by  the  word  "indi- 
vidualism." 

Another  term  sometimes  applied  to  our  system  is  com- 
petition. It  happens  that  there  is  a  great  deal  of  com- 
petition in  our  system.  But  it  will  appear  that  this  is  a 
result  of  voluntarism,  or  at  least  that  competition  will 
automatically  exist  except  where  it  is  sternly  repressed  and 


170  THIS  ECONOMIC  WORLD 

men  are  compelled  to  do  what  they  are  told  to  do  rather 
than  what  they  would  like  to  do.  Wherever  men  are  per- 
mitted to  make  their  own  arrangements  with  their  fellows 
on  the  basis  of  voluntary  agreement,  there  will  certainly 
be  competition  unless  human  nature  should  so  change  that 
men  would  no  longer  care  to  drink  "delight  of  battle  with 
their  peers,"  or  even  to  read  stories  or  see  dramatic  repre- 
sentations of  combat.  Besides,  all  who  care  to  do  so  may 
cooperate  as  well  as  compete  under  our  system.  In  fact 
there  is  nothing  in  our  system  to  prevent  cooperation 
from  spreading  until  it  becomes  universal  except  the  pref- 
erence of  certain  people  for  competition.  So  long  as  co- 
operation is  voluntary,  it  fits  as  well  into  our  system  as 
competition.  To  make  it  compulsory  would  destroy  our 
system,  not  because  it  destroyed  competition  but  because 
it  destroyed  voluntarism.  In  fact,  any  of  the  so-called 
forms  of  socialism  or  communism  are  quite  compatible 
with  the  present  economic  system,  provided  they  are  vol- 
untary and  not  compulsory;  but,  in  reality,  without  com- 
pulsion they  would  not  be  accepted  as  either  socialistic 
or  communistic  by  the  ordinary  socialist  or  communist. 

As  a  matter  of  fact,  there  have  been  a  great  many  com- 
munistic societies  in  the  United  States.  Unless  they  intro- 
duced such  features  as  complex  or  plural  marriage,  or 
some  other  non-essential  which  shocked  the  moral  sense 
of  the  country,  they  were  not  interfered  with.  There  was 
no  reason  in  our  laws  or  institutions  why  communism 
might  not  have  become  universal  if  our  people  could  all 
have  been  persuaded  to  join  these  or  organize  other  com- 
munistic groups. 


LIBERTY  AND  AUTHORITY 

The  following  is  a  partial  list. 


171 


American 

Communistic" 

Societies 


The  Shakers  (numerous  colonies),  Maine  to  Ken- 
tucky, 1787- 

The  Perfectionists  of  Oneida,  New  York,   1848- 
1879. 

Zion  City,  Illinois,  1890-1896. 

Jemima  Wilkinson's  New  Jerusalem,  New  York, 
1786-1820. 

Celesta,  Pennsylvania,  1852-1864. 

Salem-on-Erie,  New  York,  1876. 

The  Woman's  Commonwealth,  Texas  and  Wash- 
ington, D.  C,  1880- 

The  Lord's  Farm,  New  Jersey,  l877- 

Shalam,  or  The  Children's  Land,  New  Mexico, 
1884-1901. 

Estero,  Florida,  1904. 

The  Christian  Commonwealth,  Georgia,  1896. 
.The  House  of  David,  Michigan. 


Of  American 
origin 


NON-RELIGIOUS< 


Of  foreign 
origin 


Owenistic 


Fowieristic 


"Ephrata,  Pennsylvania,  1732. 
The  Harmonists,  Pennsylvania,  1803. 
The  Separatists  of  Zoar,  Ohio,  1819-1898. 
The  Amana  Society,  Iowa,  1843. 
J  The  Bishop  Hill  Colony,  Illinois,  1846-1862. 
I  The    Bruederhof  Communities,    South    Dakota, 
1862. 
The  Waldensian  Colonies,  North  Carolina  and 

Texas,  1893. 
St.  Nazian's  Colony,  Wisconsin,  1854. 

fNew  Harmony,  Indiana,  1825-1827. 
<  Yellow  Springs,  Ohio,  1824. 
l_^Numerous  others. 

Brook  Farm,  Massachusetts,  i84i-l84J- 

Fruitlands,  Massachusetts,  1843. 

Hopedale,  Massachusetts,  1841-1858. 

North  American  Phalanx,  New  Jersey,  1843-1856. 

Wisconsin  Phalanx,  Wisconsin,  1844-1850. 

Northampton  Association,    Massachusetts,  1842- 

1846. 
..Numerous  others. 


fNauvoo,  Illinois,  1849-1866. 
The  Icarians4^  Cheltenham,  Missouri,  1858-1864. 
l^Icaria,  Iowa,  l86o-l89S- 

Skaneateles  Community,  New  York,  1844-1846. 
Polish  Colony,  Anaheim,  California,   1876-1878. 
Topolobampo,  Mexico,  1886-1901. 
The  Ruskin  Commonwealth,  Georgia,  1896-1901. 
JndependeiU  <^  The  Co-operative  Brotherhood,  Washington,  1897. 
Equality  Colony,  Washington,  1899. 
The  Straight  Edgers,  New  York,  l899- 
The  Helicon  Home,  1906-1907. 
XIano  Colony,  New  Llano,  Louisiana. 


172  THIS  ECONO:\IIC  WORLD 

Not  one  of  these  groups  ever  gave  up  communism, 
though  some  of  them  had  to  give  up  certain  non-essen- 
tials, because  of  the  hostility  of  our  laws.  Their  failures, 
when  they  failed,  were  due  to  their  inability  either  to 
make  new  converts  or  to  hold  their  own  people.  The 
general  preference  for  the  kind  of  life  enjoyed  by  non- 
communists  overthatenjoyed  by  communists  was  so  strong 
that  nothing  short  of  drastic  compulsion  could  have  made 
it  universal.  Compulsion  was  not  necessary  to  destroy 
communism.  Freedom  on  the  part  of  each  one  to  choose 
communism  or  individualism  was  enough  in  most  cases. 

No  genuine  liberal  would  propose  or  support  any  hos- 
tile legislation  against  the  voluntary  spread  of  commun- 
ism. He  might  decline  to  join  a  communistic  group  and 
advise  his  friends  to  do  likewise,  but  his  liberalism  would 
compel  him  to  permit  those  who  like  it  to  adopt  it  with- 
out legal  hindrance.  That  would  only  be  giving  com- 
munists the  right  which  he  claims  for  himself,  namely,  the 
right  of  deciding  for  himself  as  an  individual  what  rela- 
tionships he  shall  enter  into  with  his  fellow  citizens,  each 
of  them,  in  turn,  acting  voluntarily.  The  use  of  compul- 
sion, either  to  force  communism  upon  an  unwilling  mi- 
nority or  to  prevent  a  communistic  minority  from  organ- 
izing communistic  groups  among  themselves,  would  be 
equally  subversive  of  voluntarism. 

Two  questions  now  arise  which  seem  to  demand  imme- 
diate discussion.  Since  it  is  impossible  to  discuss  them 
both  at  once,  it  is  necessary  to  take  them  in  order.  These 
questions  are,  first,  What  real  advantage  is  there  in  the 
method  of  voluntary  agreement  over  that  of  authority 


LIBERTY  AND  AUTHORITY  173 

and  obedience  as  a  means  of  coordinating  human  effort? 
second,  How  far  is  it  possible  to  carry  the  method  of  vol- 
untary agreement  to  the  displacement  of  the  method  of 
authority  and  obedience? 

As  to  the  first  question,  one  may  say  at  least  that  the 
method  of  authority  and  obedience  is  less  pleasant  to  the 
one  who  has  to  render  obedience  than  the  method  of  vol- 
untary agreement.  If  there  is  any  doubt  about  this,  it  can 
easily  be  tested  by  the  reader.  Of  course,  it  may  be  said, 
on  the  other  hand,  that  the  method  of  authority  and  obe- 
dience is  more  pleasant  to  the  one  who  exercises  authority 
than  the  method  of  voluntary  agreement.  This  can  also 
be  tested  if  there  is  any  disposition  to  deny  it.  The  first 
of  these  facts  probably  explains  why  the  method  of  vol- 
untary agreement  seems  to  spread  with  the  spread  of 
democracy.  They  who  were  formerly  in  a  position  of 
obedience  have,  throughout  modern  history,  shown  a  dis- 
position to  get  out  from  under  such  a  system  and  to  sub- 
stitute the  method  of  agreement.  The  second  of  these 
two  facts  probably  explains  the  general  opposition  to  the 
method  of  voluntary  agreement  by  all  those  who  were,  in 
the  past,  in  a  position  of  authority.  The  old  military  aris- 
tocracies of  the  world  have  always  scorned  the  method  of 
voluntary  agreement.  It  is  the  method  of  the  bour- 
geoisie, and  men  of  violence  have  shown  a  tendency  to 
pronounce  that  word  as  though  it  were  an  epithet.  Not 
simply  the  old  military  aristocracies  but  every  militant 
class  has  shown  the  same  disposition. 

The  principle  involved — the  general  preference  of 
democracies  for  voluntarism — helps  to  explain  another 


174  THIS  ECONOMIC  WORLD 

prominent  fact  of  the  modern  social  system.  It  is  one  of 
the  paradoxes  of  our  modern  social  life  that  economic 
strength  and  political  strength  are  almost  antithetical 
terms.  Any  class  or  group  which  becomes  numerous  be- 
comes weak  economically  but  strong  politically.  On  the 
basis  of  voluntary  agreement  or  free  contract,  it  is  at  a 
disadvantage  on  the  market,  where  its  numbers  make  it 
weak  in  bargaining.  But  in  the  exercise  of  authority 
through  the  agency  of  government,  its  numbers  make  it 
strong  in  voting  power,  and  this  gives  it  an  advantage.  If, 
for  example,  manual  workers  are  exceedingly  numerous  in 
comparison  with  mental  workers,  managers,  investors, 
and  the  like,  the  oversupply  of  manual  labor  will  give  low 
bargaining  power  to  the  manual  workers,  but  their  very 
numbers  give  them  great  voting  as  well  as  fighting  power. 

Another  phase  of  the  same  principle  is  found  in  the  fact 
that  the  smallness  of  the  numbers  of  those  who  are  cap- 
able of  performing  the  functions  in  Industry  other  than 
manual  labor  gives  them  great  advantage  on  the  market. 
They  can  command  high  salaries,  high  interest  rates,  high 
profits.  Having  few  competitors,  they  can  almost  dic- 
tate their  own  terms;  but,  on  the  other  hand,  the  small- 
ness of  their  numbers  gives  them  low  voting  power  and 
little  control  over  government,  especially  if  the  manual 
workers  become  aware  of  their  power  or  are  organized 
and  led  by  skillful  demagogues. 

This  antithesis  of  economic  and  political  strength  Is 
very  likely  to  react  on  the  attitudes  of  different  classes 
toward  the  problem  of  voluntarism.  Those  who  are  in 
the  weak  position  economically  find  freedom  of  contract 


LIBERTY  AND  AUTHORITY  175 

of  comparatively  little  advantage  to  them.  If  the  over- 
supply  of  manual  labor  is  acute  enough,  it  becomes  liter- 
ally true,  as  has  sometimes  been  sweepingly  asserted,  that 
freedom  to  bargain  for  wages  merely  means  freedom  to 
be  poor  or  even  to  starve.  Naturally,  such  freedom  Is 
not  highly  prized.  Many  a  person  in  that  situation  would 
be  glad  to  exchange  such  freedom  for  a  guaranteed  ration 
under  some  sort  of  an  industrial  army  In  which  the  method 
of  authority  and  obedience  was  used  exclusively  and  the 
method  of  voluntary  agreement  not  at  all. 

This  explains  the  observed  fact  in  the  present  economic 
world  that  the  only  places  where  a  socialistic  and  com- 
munistic revolution  is  at  all  possible  are  those  places  where 
there  is  an  enormous  oversupply  of  manual  labor  and  a 
corresponding  dearth  of  managers,  technicians,  enter- 
prisers, and  capitalists.  Any  country  In  which  there  Is 
even  a  mild  scarcity  of  manual  labor  and  a  relative  abun- 
dance of  technicians,  managers,  enterprisers,  and  capital- 
ists shows  little  Interest  In  such  a  revolution.  Where 
manual  laborers  are  scarce,  their  bargaining  power  Is 
high.  Freedom  to  them  does  not  mean  freedom  to  starve; 
It  means  freedom  to  get  better  and  better  wages.  Few 
of  them,  under  such  conditions,  would  be  willing  to  ex- 
change the  method  of  voluntary  agreement  for  authority, 
even  If  they  could  be  assured,  which  they  cannot,  of 
slightly  higher  wages  to  be  issued  from  a  communistic 
commissariat  In  the  form  of  rations  and  other  supplies. 

Marx,  who  was  logical  enough  to  reason  correctly  from 
such  premises  as  he  saw  fit  to  assume  but  who,  because  he 
assumed  false  premises,  reached  In  practically  every  case 


176  THIS  ECONOMIC  WORLD 

diametrically  wrong  conclusions,  predicted  that  a  com- 
munistic revolution  would  come  first  in  those  countries  in 
which  capitalism  developed  first.  Starting  with  the  as- 
sumption that  whatever  a  capitalist  made  he  must  neces- 
sairly  make  by  subtracting  from  wages,  he  reasoned  that 
as  capitalism  developed,  the  share  of  the  laborer  would 
grow  less  and  less,  and  the  share  of  the  capitalist  more 
and  more,  until  all  laborers  would  see  that  free  bargain- 
ing was  no  longer  of  any  advantage  to  them  and  would 
use  the  power  that  numbers  give  them  to  overthrow  the 
system  and  substitute  some  form  of  socialism  or  com- 
munism. If  Marx  had  started  with  the  correct  assump- 
tion, he  would  have  reached  diametrically  the  opposite 
conclusion,  namely,  that  those  countries  in  which  capital- 
ism developed  first  and  farthest  would  be  the  last  to  give 
up  the  system  of  voluntary  agreement  and  go  over  to  the 
system  of  authority  and  obedience  or  any  kind  of  com- 
pulsory socialism  or  communism.  In  other  words,  if  he 
had  understood  the  fact  that  as  the  system  of  voluntary 
agreement  developed  in  its  purer  forms,  capitalists,  like 
everyone  else,  would  gain  only  in  proportion  as  they  con- 
tributed to  the  wealth  of  others,  and  that  under  these 
conditions  the  further  capitalism  developed,  the  higher 
wages  would  become,  reasoning  from  a  correct  under- 
standing of  the  facts  of  the  case,  he  would  have  concluded 
that  the  only  countries  in  which  the  tendency  toward  free- 
dom of  contract  would  be  reversed  by  a  socialistic  or  com- 
munistic revolution  would  be  those  in  which  It  had  not  de- 
veloped far  enough  to  pay  high  wages.  Such  a  prediction 
would  have  been  verified  already  by  the  historical  facts  of 


LIBERTY  AND  AUTHORITY  177 

the  present  day.  Not  In  the  United  States,  where  the  sys- 
tem of  voluntarism  has  had  its  highest  development,  but 
in  Russia  and  Mexico,  where  it  has  had  the  lowest  devel- 
opment, the  revolution  has  been  attempted. 

It  is  somewhat  amusing  to  notice  how  the  defenders  of 
Marx  try  to  wriggle  out  of  this.  One  subterfuge  is  to 
point  out  that  although  prosperity  is  being  diffused  in  this 
country  and  although  even  the  shares  of  the  great  indus- 
trial corporations  are  being  owned  by  larger  and  larger 
numbers  of  people  of  all  classes,  the  management  of  these 
corporations  is  still  concentrated  in  few  hands.  Marx  did 
not  think  it  necessary  to  say  that  any  large  enterprise, 
whether  governmental  or  private,  would  have  to  be  car- 
ried- on  under  somewhat  concentrated  management.  He 
specifically  pointed  out  that  the  ownership  of  capital  must 
pass,  more  and  more,  into  the  hands  of  a  few,  which  has 
turned  out  to  be  a  diametrically  wrong  prediction.  As  to 
concentrated  management,  that  is,  of  course,  necessary  if 
we  are  to  have  large-scale  industries,  whether  owned  by 
private  investors  or  by  the  government.  The  only  ques- 
tion is,  shall  the  few  to  whom  management  must  be  dele- 
gated be  responsible  or  irresponsible  to  those  whom  they 
represent?  There  is  always  danger  of  irresponsibility. 
That  danger  is  quite  as  great  today  in  the  management  of 
government  enterprise  as  in  the  management  of  private 
enterprises.  A  number  of  people  have  had  occasion  to 
complain  of  what  they  feel  to  be  an  irresponsible  or  arbi- 
trary management  of  the  post  office  in  the  exclusion  of 
obscene  literature  from  the  mails.  Professor  Ripley's  val- 
uable work  of  exposing  cases  of  irresponsible  manage- 


178  THIS  ECONOMIC  WORLD 

ment  is  not  a  campaign  against  concentrated  management. 
It  is  a  campaign  against  irresponsible  management. 

While  the  growing  spirit  of  democracy  has  brought 
with  it  increasing  consideration  for  the  feelings  of  those 
who  were  formerly  in  a  position  of  obedience  and  less  con- 
sideration for  the  feelings  of  those  who  were  formerly  in 
a  position  of  authority,  it  is  perhaps  worth  considering  in 
a  purely  academic  fashion  whether  the  gain  in  pleasant- 
ness to  those  who  formerly  obeyed  but  now  enter  into 
voluntary  agreements  is  sufficient  to  offset  the  loss  in 
pleasantness  to  those  who  formerly  exercised  authority  but 
are  now  compelled  to  bargain.  Arithmetic  is  on  the  side 
of  the  affirmative  of  this  question.  That  is,  the  number  of 
those  who  have  gained  is  greater  than  the  number  of 
those  who  have  lost.  If  there  had  ever  been  a  condition 
of  authority  and  obedience  in  which  each  person  in  au- 
thority exercised  power  over  one  person  only,  then  the 
numbers  of  those  in  authority  and  those  In  obedience 
would  have  been  equal,  and  this  purely  arithmetical  argu- 
ment would  not  be  valid;  but  that  was  never  the  case. 
Only  a  few  were  ever  in  a  position  of  authority;  many 
were  in  a  position  of  obedience.  Only  a  few,  therefore, 
have  lost  the  feeling  of  pleasantness  by  being  deprived 
of  authority  and  compelled  to  bargain.  The  many  have 
gained  by  being  freed  from  the  necessity  of  obedience  and 
by  being  permitted  to  bargain. 

There  is  still  another  somewhat  technical  reason  for 
the  support  of  the  affirmative.  This  reason  is  found  in 
the  proposition  that,  on  the  average,  one  man  with  an- 
other, the  individual  whose  feeling  of  pleasantness  was 


LIBERTY  AND  AUTHORITY  179 

increased  by  being  freed  from  authority  and  permitted  to 
bargain  has  gained  more  than  the  other  has  lost  by  being 
deprived  of  authority  and  compelled  to  bargain.  When 
an  organization  like  an  army,  whose  organization  is  based 
on  authority  and  obedience,  is  disbanded,  the  private  gains 
more  in  being  relieved  from  authority  than  the  officer 
loses  by  being  deprived  of  authority.  The  lower  officers, 
at  least,  are  in  a  middle  position — they  exercise  authority 
over  some  but  are  under  the  authority  of  others.  The 
net  loss  to  them  is  probably  negligible. 

Aside  from  all  feelings  of  pleasantness  in  connection 
with  obedience  on  the  one  hand  and  voluntary  agreement 
on  the  other,  there  is  the  question  of  efficiency.  If  two 
persons  can  by  any  possibility  be  brought  into  agreement 
on  a  given  plan  or  the  carrying  out  of  a  given  purpose,  so 
that  each  one  comprehends  it  and  enters  into  it  with  un- 
derstanding and  willingness,  the  two  can  probably  coordi- 
nate their  efforts  more  effectively,  with  less  waste  and 
friction,  than  if  one  alone  understands  what  the  purpose 
is  and  merely  compels  the  other  to  work  with  him.  In 
the  latter  case  the  one  who  works  under  authority  will 
work  at  some  disadvantage. 

The  only  question  in  this  case  is,  how  far  is  It  possible 
for  the  different  participants  in  any  large  enterprise  to 
work  together  on  such  a  basis  of  common  understanding 
and  agreement?  Where  it  is  impossible,  of  course,  the 
alternative  is  either  authority  and  obedience  on  the  one 
hand,  or  the  abandonment  of  the  enterprise  on  the  other. 
If  it  is  possible,  however,  to  extend  the  field  of  voluntary 
agreement  and  by  so  doing  to  restrict  the  field  of  au- 


r8o  THIS  ECONOMIC  WORLD 

thority  and  obedience,  that  would  be  a  kind  of  progress. 
But  arbitrarily  or  forcibly  to  suppress  or  hinder  the  ex- 
pansion of  voluntary  agreement  would  be  either  an  ob- 
struction to  progress  or  positive  retrogression. 

This  brings  us  to  the  second  of  the  above  questions — 
How  far  is  it  possible  to  extend  the  principle  of  voluntary 
agreement  among  free  citizens,  or  to  substitute  it  for  the 
method  of  authority  and  obedience  as  a  means  of  coordi- 
nating human  effort?  Because  it  works  well  in  a  limited 
field,  it  does  not  necessarily  follow  that  It  could  be  ex- 
tended to  every  possible  relationship  of  life.  Neither 
does  it  follow,  of  course,  that  government  authority 
should  be  extended  over  everything  because  It  happens  to 
work  well  In  a  few  cases.  Somewhere  there  probably  Is  a 
balance  between  the  principle  of  authority  and  the  prin- 
ciple of  voluntarism.  If  that  balance  can  be  found,  the 
optimum  result  may  be  expected  to  follow. 

Some  have  seen  fit  to  call  the  system  toward  which  we 
are  tending  the  system  of  natural  liberty,  but  the  word 
"natural"  has  been  a  stumbling  block  to  others.  If  It  Is 
meant  to  Imply  something  primitive,  or  something  which 
would  automatically  exist  in  the  absence  of  organized 
government,  It  is  pretty  certain  that  there  never  was  any 
such  thing  as  natural  liberty  except  in  imagination.  Bully- 
ing of  one  by  another  would  pretty  effectually  destroy 
the  liberty  of  all  except  the  more  successful  bullies.  Such 
unorganized  or  unstandardlzed  bullying  according  to  the 
incalculable  whims  of  a  bully  Is  much  more  destructive  of 
liberty  than  the  orderly  processes  of  a  government  of 
law.     Under  a  government  of  law,  where  the  law  is  un- 


LIBERTY  AND  AUTHORITY  i8i 

derstood  by  everyone  and  where  everyone  knows  who  its 
administrators  are,  everyone  can  at  least  know  what  to 
expect,  which  would  be  impossible  under  unorganized 
bullying,  banditry,  or  even  rowdyism.  A  government  of 
law  resembles,  in  one  respect  at  least,  that  of  calculability, 
a  law  of  nature,  and  the  citizen  can  adjust  himself  to  one 
about  as  easily  as  to  the  other.  In  the  suppression  of  irre- 
sponsible and  incalculable  violence  by  responsible  and  cal- 
culable use  of  force,  we  have  a  legitimate  field  for  the  use 
of  governmental  authority. 

Even  though  the  orderly  and  calculable  processes  of 
law  forbid  many  things  which  the  individual  would  like  to 
do,  he  is  at  least  perfectly  free  to  act  as  he  will  in  the  un- 
forbidden field.  This  is  something  that  cannot  be  said  of 
any  lawless  condition.  Under  a  lawless  condition  he  can 
never  know  what  he  may  or  may  not  do ;  he  can  never  feel 
free  to  act  in  any  field  whatsoever,  because  he  can  never 
calculate  on  the  behavior  of  lawless  men  or  tell  where  or 
when  one  of  them  may  use  coercion  against  him.  Of 
course,  a  bad  government  may  also  be  whimsical  and  in- 
calculable in  its  acts  and  in  that  respect  be  little  better 
than  no  government  at  all.  Nevertheless,  there  is  a  defi- 
nite gain  in  freedom  when  orderly  and  calculable  coercion 
is  used  to  suppress  disorderly  and  incalculable  coercion. 

Freedom,  however,  is  not  the  best  word  to  describe  the 
system  toward  which  we  are  developing  and  toward 
which  we  have  made  considerable  progress.  At  most, 
freedom  could  mean  only  the  minimum  of  coercion  by  one 
human  will  upon  another.  Freedom  from  the  coercion  of 
physical  laws,  from  the  coercion  of  the  general,  imper- 


I82 


THIS  ECONOMIC  WORLD 


sonal  ideals  of  decency,  or  from  the  coercion  of  the  phys- 
ical results  of  his  own  deeds  could  not  be  meant,  and  in 
all  fairness  we  must  say  that  freedom  never  did  mean  this 
to  any  exponent  of  the  doctrine  of  natural  liberty.  It  was 
a  political  concept;  it  had  to  do  with  government,  which  is 
essentially  the  control  of  certain  persons  by  others.  Even 
in  this  sense,  a  somewhat  clearer  idea  as  to  what  every 
progressive  society,  in  Sir  Henry  Maine's  sense,  is  aiming 
at  is  conveyed  by  the  term  voluntarism,  or  the  expression 
voluntary  agreement  among  free  citizens. 

If  we  are  to  live  and  work  together  in  great  societies, 
we  must  have  some  method  of  coordinating  our  efforts. 
The  easiest  and  quickest  way  to  coordinate  the  efforts  of 
large  numbers  of  men  is  to  impose  one  will  upon  them  all 
and  to  compel  them  all  to  work  according  to  a  plan  which 
one  mind  holds.  Gradually,  very  gradually,  in  fact,  men 
learned  to  coordinate  their  own  efforts  by  agreeing  upon 
one  plan  and  upon  the  part  which  each  should  play  in 
carrying  it  out.  This  was  a  cumbersome  method  at  first, 
and  applicable  to  only  a  few  simple  cases.  It  is  even 
probable  that  our  ancestors  had  to  learn  how  to  work 
under  a  system  of  voluntary  agreement  by  long  experience 
under  authority.  Instead  of  learning  to  govern  themselves 
by  the  practice  of  self-government,  they  probably  learned 
it  through  being  well  governed  from  above.  Even  the 
so-called  Nordic  qualities  seem  to  correlate  somewhat 
more  accurately  with  a  long  training  under  Feudalism 
than  with  blondness  or  dolichocephalism.  Feudalism  was 
at  least  an  orderly  system  and  seems  to  have  played  a  part 
in  the  civilization  of  northern  Europe  similar  to  that 


LIBERTY  AND  AUTHORITY  183 

played  by  the  Roman  law  and  the  Roman  administrators 
In  southern  Europe,  and  by  slavery  in  the  civilizing  of  the 
American  Negro. 

If  one  is  ever  convinced  of  the  desirability  of  the  widest 
possible  extension  of  the  method  of  voluntary  agreement 
as  the  method  of  correlating  the  efforts  of  large  numbers 
of  men,  it  should  not  be  difficult  to  convince  him  that  some 
coercion,  properly  directed  and  reduced  to  an  orderly  sys- 
tem. Is  necessary  for  the  realization  of  that  condition. 
Coercion  by  an  orderly  and  responsible  government  to  re- 
press coercion  by  disorderly  and  irresponsible  individuals 
is,  as  shown  above,  at  least  necessary.  In  the  absence  of 
such  repression,  or  in  a  condition  where  violence  and  coer- 
cion are  freely  practiced  by  one  individual  upon  another, 
there  Is  not  much  room  for  or  encouragement  of  volun- 
tary agreement.  But  where  all  forms  of  private  violence 
are  effectually  repressed,  individuals  can  work  together 
on  the  basis  of  free  contract  with  the  minimum  of  Inter- 
ference. 

Again,  there  would  be  a  serious  discouragement  of  vol- 
untary agreement  if,  after  an  agreement  had  been  made, 
and  one  party  to  the  agreement  had  received  all  the  bene- 
fit he  could  hope  to  get  from  it,  he  were  then  permitted 
to  withdraw  or  to  refuse  to  carry  out  his  part.  If  that 
were  permitted,  men  would  have  to  be  exceedingly  cau- 
tious about  entering  into  agreements  with  their  fellows. 
A  Japanese  adage  says,  "Don't  lend  to  a  monkey  unless 
you  can  climb  a  tree."  If,  however,  an  orderly  and  calcu- 
lable coercive  agency,  that  is,  a  government  of  law,  will 
compel  each  party  to  an  agreement  to  perform  his  part, 


i84  THIS  ECONOMIC  WORLD 

more  men  will  be  willing  to  enter  into  such  agreements 
than  would  otherwise  be  the  case.  In  short,  the  reason- 
able enforcement  of  contracts  is  a  form  of  coercion  which 
extends  the  practice  of  making  contracts.  The  punish- 
ment of  fraud  accomplishes  the  same  purpose.  Without 
the  safety  which  is  given  by  the  suppression  of  fraud,  men 
would  be  much  more  cautious  than  is  now  necessary  in 
dealing  with  one  another  on  the  basis  of  voluntary  agree- 
ment. 

It  is  sometimes  considered  a  paradox  to  say  that  some 
limitation  upon  the  freedom  of  the  individual  may  be 
necessary  for  a  larger  freedom;  but  it  is  no  paradox  at  all. 
Thousands  of  good  illustrations  of  this  may  be  found. 
One  will  be  sufficient.  The  traffic  policeman  at  a  crowded 
corner  occasionally  restricts  the  freedom  of  an  individual 
driver,  but  if  he  justifies  his  existence  and  regulates  wisely, 
there  is  more  actual  freedom  of  movement  on  the  part  of 
all  drivers.  Traffic  moves  more  rapidly  and  smoothly, 
and  larger  numbers  are  thereby  enabled  to  do  what  they 
would  like  to  do.  This  is  a  principle  that  applies  to  all 
justifiable  regulations.  Wherever  such  a  result  can  be 
shown  to  follow  regulation,  regulation  is  justified;  where 
it  cannot,  there  is  no  justification  for  regulation.  This,  of 
course,  opens  the  way  for  a  considerable  number  of  regu- 
lations, but  it  is  not  opening  a  floodgate.  It  does  not 
mean  that  everything  should  be  regulated  which  anyone 
thinks  ought  to  be  regulated.  Every  specific  regulation 
proposed  must  be  carefully  and  fully  considered,  and  it 
must  justify  itself  beyond  a  reasonable  doubt.  A  traffic 
policeman  who  uses  his  authority  beyond  the  point  which 


LIBERTY  AND  AUTHORITY  185 

gives  the  maximum  freedom  of  movement  becomes  an 
obstruction  and  a  nuisance.  So  with  every  form  of  gov- 
ernmental authority. 

Even  freedom  of  contract,  where  there  is  neither  vio- 
lence nor  deception,  may  be  restricted  under  this  rule. 
Freedom  to  buy  and  sell  an  opiate  or  a  drug  for  which 
there  is  an  intense  appetite  and  which,  when  used,  destroys 
the  dependability  of  men  in  responsible  positions  and  en- 
dangers the  lives  of  large  numbers  of  other  people  is  cer- 
tainly a  subject  for  restriction.  If  locomotive  engineers 
should  be  permitted  freely  to  buy  and  consume  such 
things,  freedom  to  travel,  on  the  part  of  the  general  pub- 
lic, would  be  considerably  restricted.  Restricting  the 
liberty  to  buy  and  sell  such  drugs  would  considerably  in- 
crease the  freedom  of  the  general  public  to  travel  by  rail. 

As  an  illustration  of  the  extent  to  which  sophistry  may 
be  carried,  we  may  mention  an  objection  somewhat  com- 
monly used  by  those  who  attack  the  system  of  volunta- 
rism, which  is  that  even  a  contract  is  a  form  of  coercion. 
In  so  far  as  this  merely  means  that  under  extreme  condi- 
tions a  necessitous  man  may,  under  the  spur  of  dire 
necessity,  make  a  contract  that  Is  greatly  to  his  disadvan- 
tage, this  argument  would  be  well  taken.  That  question, 
however,  is  discussed  at  greater  length  in  the  chapter  of 
this  book  entitled  "The  Necessitous  Man  and  the  Law." 
We  may  say  at  this  point,  however,  that  the  general  direc- 
tion of  progress  at  the  present  time,  especially  in  the 
United  States,  is  toward  the  elimination  of  such  extreme 
conditions. 

Let  us  grant  that  a  man  out  of  work,  who  is  not  only 


i86  THIS  ECONOMIC  WORLD 

hungry  himself  but  has  a  family  in  dire  straits,  is  not  free 
in  any  important  sense;  that  is,  the  number  of  choices 
open  to  him  are  so  few  that  he  may  be  said  to  be  under 
compulsion.  A  shrewd  bargainer  can  dictate  terms  almost 
as  effectively  as  a  highwayman  with  a  gun  could  do.  The 
general  development  of  our  institutions,  however,  is  put- 
ting fewer  and  fewer  men  in  such  a  position  of  necessity. 
It  is  enlarging  the  number  of  choices  open  to  each  indi- 
vidual. The  typical  case  is  represented,  let  us  say,  by  a 
man  who  has  a  number  of  dollars  in  his  pocket,  a  small 
savings  account,  some  industrial  or  other  forms  of  life 
insurance,  a  family  reasonably  well  fed,  a  position  that 
pays  him  a  living  wage,  and  several  other  positions, 
almost  as  good,  open  to  him  whenever  he  cares  to  take 
them.  When  such  a  man  is  facing  a  seller  of  provisions, 
the  seller  is  fully  as  anxious  to  get  this  man's  money  as 
the  man  is  to  get  provisions  from  this  particular  seller. 
Our  potential  buyer  of  provisions  knows  that  there  are 
other  stores  around  the  corner  which  are  also  anxious  to 
get  his  trade.  It  is  reasonable  to  suggest  that  the  man  we 
are  describing  is  a  reasonably  free  man,  so  far  as  his  deal- 
ings with  his  grocer  are  concerned.  It  is  also  capable  of 
verification  that  most  men  in  this  country  at  the  present 
time  are  in  a  position  similar  to  the  one  we  have  described 
and  that  very  few,  if  any,  are  in  a  position  of  dire  neces- 
sity of  the  kind  described  earlier.  When  there  is  a  general 
scarcity  of  labor,  such  a  man  is  a  free  man,  also,  when  he 
is  facing  an  employer.  He  has  several  other  jobs  waiting 
for  him  and  does  not  have  to  take  the  first  one  offered. 
This  point  is  discussed  more  fully  in  the  chapter  on  *'The 


LIBERTY  AND  AUTHORITY  187 

Supposed  Necessity  for  An  Industrial  Reserve  Army." 
In  so  far  as  men  can  be  lifted  out  of  the  position  of 
dire  necessity  In  which  the  individual  has  very  few  choices 
and  put  into  a  position  of  reasonable  affluence  where  each 
one  has  a  large  number  of  choices,  it  becomes  true  that 
voluntarism  is  something  genuine  and  easily  distinguished 
from  coercion.  Doubtless  this  looks  like  a  truism  to  most 
people.  It  ought  not  to  be  necessary  even  to  mention  such 
a  thing,  but  the  fact  is  that  a  considerable  body  of  litera- 
ture has  grown  up  recently  which  attacks  even  such  a 
truism  as  this  and  asserts  that  every  form  of  contract  is 
a  form  of  coercion — that  there  is  no  qualitative  difference 
between  holding  a  revolver  at  a  man's  head  and  demand- 
ing his  money,  giving  him  the  alternative  of  paying  money 
to  you  or  receiving  a  severe  physical  injury,  on  the  one 
hand,  and  threatening  to  withhold  from  a  man  a  good 
which  he  desires  unless  he  hands  you  his  money.  In  both 
cases,  it  is  asserted,  you  give  the  man  two  alternatives: 
one  to  give  you  his  money,  the  other  to  suffer  some  loss 
or  hardship.  Quantitatively,  it  is  of  course,  admitted 
that  the  hardship  or  the  loss  may  be  greater  in  the  one 
case  than  in  the  other,  but  qualitatively  the  two  cases  are 
said  to  be  alike  in  that  the  individual  whom  we  are  con- 
sidering has  two  alternatives.  Of  course,  the  provision 
dealer,  the  employer,  or  whoever  it  is  that  is  presenting 
the  alternatives  also  has  two  alternatives,  so  he  is  equally 
coercing  and  coerced. 

To  begin  with,  it  is  not  true  that  in  both  cases  the  indi- 
vidual with  whom  you  are  dealing  is  limited  to  two  alter- 
natives.   The  highwayman  actually  limits  the  man  before 


i88  THIS  ECONOMIC  WORLD 

him  to  the  alternatives  of  giving  up  his  money  or  his  life. 
The  bargainer  cannot  limit  the  man  before  him  to  these 
alternatives.  The  man  can  turn  away  from  his  bargainer, 
giving  up  neither  his  money  nor  the  thing  desired,  be- 
cause he  can  get  it  of  someone  else.  The  tendency  of 
modern  progress  is  to  give  to  every  individual  in  what- 
ever relation  of  life  a  large  number  of  choices,  thus  defi- 
nitely putting  him  in  a  position  where  he  cannot  be  co- 
erced or  compelled  to  choose  between  two  excruciating 
or  even  disagreeable  alternatives.  The  tendency  is  more 
and  more  to  use  the  coercion  of  an  orderly  and  responsible 
government  to  suppress  not  only  the  highwayman  who 
leaves  his  victim  only  two  disagreeable  alternatives,  but 
everyone  else,  from  the  monopolist  down  to  the  lowest 
criminal,  who  tries  in  any  way  to  reduce  the  number  of 
choices  open  to  those  with  whom  they  deal. 

All  such  extensions  of  governmental  authority  tend  to 
increase  the  field  of  voluntarism  and  make  it  possible  for 
larger  and  larger  numbers  of  human  relationships  to  base 
themselves  on  voluntary  agreement  rather  than  on  au- 
thority and  obedience.  Every  authoritarian,  in  so  far  as 
he  extends  his  authority,  does  the  opposite.  He  gives 
the  one  over  whom  he  exercises  authority  fewer  and  fewer 
choices,  and  these  usually  of  a  more  and  more  excruciat- 
ing or  disagreeable  nature.  In  the  extreme  case,  he  may 
exercise  the  death  penalty  and  give  his  subject  the  two 
alternatives  of  do  or  die.  In  less  extreme  cases  he  merely 
presents  less  excruciating  alternatives,  to  obey  or  to  re- 
ceive some  positively  disagreeable  punishment.  This  at 
best  leaves  the  subject  a  choice  of  two  disagreeable  alter- 


LIBERTY  AND  AUTHORITY  189 

natives,  but  the  ordinary  bargainer,  under  such  conditions 
as  we  are  making  more  and  more  common,  is  enabled  to 
choose  among  a  considerable  number  of  agreeable  alter- 
natives— to  choose,  in  other  words,  among  several  posi- 
tive goods  rather  than  between  two  positive  evils.  Even 
though  in  choosing  one  positive  good  he  is  compelled  to 
give  up  several  others,  his  freedom  is  much  larger  and  the 
alternatives  less  disagreeable  than  when,  as  under  au- 
thority, he  has  only  the  choice  between  two  disagreeable 
alternatives,  that  is,  between  doing  a  disagreeable  thing  or 
receiving  a  disagreeable  punishment. 

Recent  discussions  have  shown  infinite  possibilities  of 
sophistry  in  dealing  with  a  problem  of  this  kind.  One 
need  not  be  confused  by  these  sophistries  if  he  will  always 
apply  the  arithmetical  test  of  the  number  of  choices  pre- 
sented under  the  system  of  free  bargaining  on  the  one 
hand,  and  under  the  system  of  authority  and  obedience  on 
the  other. 


VI 


ECONOMIC  EQUALITY 

THE  DESIRE  for  equality  has  been  even  more  per- 
sistent than  that   for  liberty.     As   De  Tocqueville 
says  :^ 

During  the  period  that  has  elapsed  since  the  Revolution,  the 
passion  for  liberty  has  frequently  been  extinguished  again,  and 
again  revived.  This  will  long  be  the  case,  for  it  is  still  inexperi- 
enced, ill  regulated,  easily  discouraged,  easily  frightened  away, 
easily  overcome,  superficial,  and  evanescent.  Meanwhile,  the  pas- 
sion for  equality  has  retained  its  place  at  the  bottom  of  the  hearts 
it  originally  penetrated,  and  linked  with  their  dearest  sentiments. 

Mussolini  has  been  quoted  as  saying  that  while  Italian 
working  men  had  asked  him  for  all  sorts  of  things,  such 
as  better  wages  and  working  conditions,  better  schools, 
and  so  on,  no  real  working  man  had  ever  asked  for  more 
liberty  than  he  already  had. 

But  while  the  desire  for  equality  has  persisted,  our  un- 
derstanding of  its  real  meaning  has  always  been  some- 
what vague.  In  order  that  the  desire  for  equality  may 
express  itself  in  the  form  of  a  clear-cut  and  rational 
policy,  we  must  clarify  our  ideas  as  to  what  it  really  Is. 

To  say  that  two  things  are  equal  means,  of  course, 
nothing.     To  say  that  two  physical  objects  are  of  equal 

^  Alexis  de  Tocqueville,  T/ie  Old  Regime  and  the  Revolution,  trans- 
lated by  John  Bonner  (New  York,  Harper  and  Brothers,  1856),  pp. 
252-253. 

190 


ECONOMIC  EQUALITY  191 

length,  breadth,  thickness,  cubic  contents,  or  weight  means 
something.  Similarly,  to  say  that  men  are  equal  means 
nothing  until  it  is  specified  in  what  respects  they  are  equal. 
It  would  mean  something  to  say  of  two  men  that  they  are 
of  equal  stature,  weight,  physical  strength,  intelhgence, 
or  the  like,  but  even  in  these  cases  the  specifications  should 
be  very  accurately  stated.  Ordinarily,  however,  when  we 
speak  of  equality  among  men,  we  do  not  refer  to  any  of 
these  personal  qualities — either  physical  or  mental.  We 
usually  have  in  mind  some  social,  economic,  or  legal  aspect 
of  their  condition  or  status.  If  the  government,  through 
its  administrative  and  judicial  oflicers,  treats  all  men  alike, 
holding  them  to  the  same  obligations,  awarding  them  the 
same  protection  without  bias  or  preference,  we  usually  say 
that  they  are  equal,  meaning  that  they  are  accorded  equal 
consideration  and  equal  treatment.  This,  however,  does 
not  mean  that  the  law-abiding  person  is  treated  in  pre- 
cisely the  same  way  as  the  lawbreaker.  We  only  mean 
that  the  law  is  of  general  application  and  that  whoever 
breaks  it,  whatever  his  wealth,  family,  or  social  position, 
is  punished  equally;  whoever  obeys  it,  regardless  of  all 
such  differences,  is  equally  protected.  If  the  government 
succeeds  in  establishing  a  rule  of  law  and  applies  this  law 
to  all  persons  without  favor  or  preference,  the  citizens  of 
that  government  may  be  said  to  be  equal  in  their  political 
and  legal  relations. 

The  law  may  be  unjust  in  other  respects;  that  is,  it 
may  declare  a  thing  to  be  a  crime  which,  on  rational 
grounds,  might  really  be  a  virtue,  or  it  might  permit 
things  which,  on  rational  grounds,  should  be  prohibited. 


192  THIS  ECONOMIC  WORLD 

This  presents  a  problem  in  itself,  but  it  is  not  the  same 
problem  as  that  of  equality,  as  the  term  equality  is  com- 
monly used.  To  be  sure.  It  may  be  argued  that  a  law  pro- 
hibiting the  sale  of  cocaine  except  on  a  doctor's  prescrip- 
tion does  not  give  the  same  treatment  to  the  one  who 
wants  cocaine  that  it  gives  to  the  one  who  wants  some 
other  article  which  is  not  prohibited.  Or  it  might  be 
argued  that  the  individual  who  is  particularly  adept  as  a 
pickpocket  or  a  burglar  but  who  lacks  the  qualities  nec- 
essary for  plying  useful  occupations  is  not  treated  as  well 
as  the  person  who  possesses  skill  in  some  accredited  occu- 
pation. Many  other  arguments  of  the  same  kind  could 
be  used  in  the  attempt  to  show  that  even  a  government  of 
law,  and  one  whose  laws  were  just  and  equitable,  did  not 
really  accord  equal  treatment  to  all  persons;  that  even 
though  a  law  against  stealing  may,  on  the  whole,  be  so- 
cially useful,  it  does,  after  all,  really  discriminate  against 
those  persons  who  possess  the  qualities  necessary  to  suc- 
cess in  stealing  and  who  lack  the  qualities  necessary  to  suc- 
ces  in  other  occupations. 

Whatever  validity  there  may  be  in  this  form  of  soph- 
istry, the  inequality  certainly  is  not  as  great  as  it  would  be 
if  stealing  were  condoned  in  one  person  and  punished  in 
another.  If  the  courts  discriminated  among  persons  on 
the  ground  of  their  social  standing,  family  history,  educa- 
tion, religion,  or  anything  else,  the  degree  of  Inequality 
would  certainly  be  much  greater  than  in  the  cases  men- 
tioned. In  other  words,  a  government  that  enforces  a  law 
against  stealing  and  punishes  equally  all  who  steal,  with- 
out regard  to  other  considerations  than  the  fact  that  they 


ECONOMIC  EQUALITY  193 

committed  the  act,  approximates  much  more  nearly  to 
equality  than  a  government  that  made  laws  of  this  kind 
but  administered  them  very  unequally  by  showing  favor 
and  consideration  to  persons  of  wealth,  political  influ- 
ence, or  distinguished  ancestry.  Probably  it  is  as  much  as 
can  be  expected  of  any  government  that  it  shall  approxi- 
mate thus  closely  to  the  ideal  of  absolute  equality. 

On  the  other  hand,  we  sometimes  speak  of  economic 
equality  as  distinct  from  political  equality  or  equality  be- 
fore the  law.  But  economic  equality  does  not  acquire  a 
real  meaning  until  we  agree  upon  some  definite  basis  of 
comparison.  We  can,  for  example,  choose  money  income 
as  a  basis  of  comparison  and  then  say,  on  that  basis,  that 
men  are  equal  or  unequal,  as  the  case  may  be,  or  that  the 
degree  of  inequality  is  very  great  or  very  little.  But  money 
income  is  not  the  only  possible  basis  of  comparison. 

Even  if  we  should  agree  upon  a  definite  basis  of  com- 
parison, such  as  money  income,  we  may  still  compare  men 
individually  or  we  may  compare  groups  or  occupations. 
We  may,  for  example,  compare  the  average  economic  con- 
dition of  all  those  who  follow  one  occupation  with  that 
of  all  those  who  follow  another.  If  we  find  that  the  aver- 
age money  income  of  one  occupation  is  about  the  same  as 
that  of  another,  we  may  say  that,  as  measured  on  that 
basis,  there  is  economic  equality  between  those  two  oc- 
cupations, even  though  there  might  be  wide  differences  of 
personal  income  among  those  who  follow  either  of  the 
occupations.  However,  as  stated  above,  money  income  is 
not  the  only  possible  basis  of  comparison. 

There  are  so  many  bases  of  comparison  and  so  many 


194  THIS  ECONOMIC  WORLD 

different  aspects  of  the  problem  of  equality  and  inequality 
as  to  make  even  a  tentative  outline  desirable  as  a  pre- 
liminary step  before  att-6mptlng  any  comprehensive  dis- 
cussion of  economic  equality.  The  following  is  suggested 
as  such  a  tentative  outline. 

(Of  opportunity  for  f Equal  pay  for , 

I  improving  one's  fPersons  in       I  equal   work    l  ^     ,.     ■' 

J-  •  \as  to  quality 

[condition  |same  |  i,  h         / 

j  I  occupation      \ 

I  f  As  among  {  |  Equal   pay   for   each   person 

Economic-!  |  |  |  regardless     of    quantity     or 

equality    |  (  |  [quality  of  work 

I  Of  actual!  [Persons  in  different  occupations 

I  condition  I  fenjoyment 

I  I  [consumption 

[  [As  measured  by-(  income 

I  property 
[control  of  property 

A  little  explanation  of  the  meaning  of  terms  used  in 
this  outline  is  perhaps  desirable.  The  first  and  widest  dis- 
tinction made  in  the  outline  is  that  between  equality  of 
opportunity  and  equality  of  actual  condition.  The  two 
are  by  no  means  identical.  In  other  words,  equality  of 
opportunity  is  quite  consistent  with  inequality  of  condi- 
tion. Two  runners  may  be  given  an  equal  start  and 
equally  good  tracks  on  which  to  run.  For  these  two  run- 
ners, this  might  be  called  equality  of  opportunity;  yet 
one  might  outnm  the  other  and  win  a  larger  prize  in  the 
form  either  of  applause  or  of  pecuniary  reward.  In  the 
enjoyment  of  these  unequal  prizes  we  should  have  in- 
equality of  condition.  There  are  many  who  would  ap- 
parently feel  satisfied  if  we  could  achieve  equality  of 
opportunity,  or  give  every  competitor  in  the  race  for  eco- 


'The  minute  division  of  labor  which  has  become  a  powerful  factor 
in  increasing  production  and  advancing  general  prosperity  itself 
creates    problems,    among   which    is  that  of  occupational  inequality." 


ECONOMIC  EQUALITY  igs 

nomic  success  equal  conditions  under  which  to  compete. 
Others  are  not  satisfied  with  equality  of  opportunity  but 
want  to  achieve  equality  of  condition,  or  at  least  a  much 
closer  approximation  to  it  than  has  yet  been  achieved. 
Probably  everyone  would  like  to  see  a  much  greater  ap- 
proximation to  equality  of  condition  if  it  could  be 
achieved  without  surrendering  the  principle  of  equality  of 
opportunity.  That  is  to  say,  if  we  could  retain  the  prin- 
ciple of  equality  of  opportunity  and  so  train  or  otherwise 
help  the  different  competitors  that  everyone  could  win  a 
good  prize  and  no  one  could  win  an  inordinately  large 
prize,  that  would  be  a  highly  desirable  result.  The  real 
question  of  dispute  is,  to  what  extent  we  should  surrender 
the  principle  of  equality  of  opportunity  in  order  to  secure 
greater  equality  of  condition. 

Referring  again  to  the  illustration  of  the  foot  race,  the 
attempt  is  sometimes  made  to  secure  what  may  be  called 
equality  of  result  by  giving  handicaps.  If  the  committee 
on  handicaps  arranges  the  runners  at  the  start,  giving  the 
slow  runners  considerable  advantage  over  the  fast  run- 
ners in  order  that  the  runners  may  be  as  nearly  even  at 
the  end  of  the  race  as  can  be  foreseen,  so  that  all  can  win 
equal  prizes,  we  shall  have  an  example  of  surrendering 
equality  of  opportunity  for  the  purpose  of  securing 
equality  of  condition.  In  the  race  for  success,  shall  the 
State  or  some  other  authority  resolve  itself  into  a  handi- 
cap committee  to  place  heavy  burdens  upon  the  swifter 
runners  or  the  more  efficient  competitors  in  order  that  the 
less  efficient  competitors  may  secure  equal  success?  Indi- 
vidualists generally  oppose  any  such  policy.     However, 


196  THIS  ECONOMIC  WORLD 

no  Individualist  would  oppose  any  policy  which  would  give 
every  possible  outward  opportunity  for  the  less  efficient 
competitors  to  acquire  greater  efficiency  through  univer- 
sal or  popular  education,  vocational  guidance,  friendly  ad- 
vice, or  anything  else  that  might  achieve  this  result. 

Another  argument  may  be  made  against  the  Idea  that 
we  can  ever  achieve  equality  of  opportunity.  The  ground 
of  this  argument  Is  that  opportunity  is  not  wholly  ob- 
jective; it  Is  partly  subjective.  For  example,  if  one  athlete 
Is  built  for  lifting  heavy  weights  and  not  for  running,  but 
is  required  to  run  for  a  prize  in  competition  with  those 
who  are  built  for  running,  there  is  not  equali<-y  of  oppor- 
tunity. Opportunity  to  run,  in  other  words,  Is  not  a  real 
opportunity  for  a  man  who  Is  built  like  a  Hereford  bull. 
Similarly,  it  may  be  claimed  that  the  man  who  possesses 
those  qualities  of  nerve  and  muscle  that  would  make  him 
a  superior  gun  fighter  or  hold-up  man  but  who  lacks  all 
sense  of  commercial  values  or  the  skill  and  patience  nec- 
essary to  the  carrying  on  of  a  productive  occupation  Is 
not  accorded  equality  of  opportunity  when  he  Is  forbidden 
to  practise  the  occupation  for  which  he  Is  especially  fitted, 
but  is  permitted  only  to  compete  in  occupations  for  which 
he  is  not  especially  fitted.  It  may  at  least  be  said.  In 
answer  to  this  kind  of  argument,  that  in  the  highly  com- 
plex economic  society  of  the  present  there  are  a  great 
many  thousand  different  kinds  of  useful  occupations  call- 
ing for  as  many  aptitudes  and  capacities.  It  would  be 
very  difficult,  therefore,  to  find  a  man  so  highly  special- 
ized for  crime  as  to  make  it  Impossible  for  him  not  to  use 
his  special  aptitudes  In  some  lawful  and  useful  occupation. 


ECONOMIC  EQUALITY  197 

When  we  come  to  discuss  the  question  of  equality  of 
condition,  it  is  important  that  we  decide,  first,  whether  we 
want  equality  as  among  persons  or  as  among  occupations. 
It  will  probably  be  agreed  that  equality  among  occupa- 
tions is  more  important  than  equality  among  persons  in 
the  same  occupation.  If,  on  the  average,  those  who  fol- 
low one  occupation  are  about  as  prosperous  as  those  who 
follow  another,  most  of  us  would  be  satisfied  even  though 
there  were  considerable  differences  among  individuals  in 
either  occupation,  provided  such  Inequalities  were  based 
upon  differences  in  the  quantity  or  the  quality  of  work  done 
by  the  different  persons.  Equal  pay  for  equal  work,  if  It 
were  achieved,  would  result  in  unequal  pay  for  different 
persons;  or,  to  state  it  In  another  way,  equal  pay  for  all 
persons  would  be  unequal  pay  for  equal  work. 

In  comparing  work  of  different  persons,  the  quantity  of 
work  done,  whether  measured  in  terms  of  hours  or  in- 
tensity, is  less  important  than  the  quality,  except  perhaps 
in  the  very  lowest  grades  of  muscular  work.  In  these 
cases  the  question  of  quality  is  probably  less  Important 
than  that  of  quantity.  In  all  skilled  manual  work,  and 
especially  in  the  professions  and  other  Intellectual  occu- 
pations, differences  of  quality  are  of  much  more  impor- 
tance than  differences  of  quantity.  Two  artists  might 
work  equally  hard  and  yet  their  products  or  their  services 
might  be  of  vastly  different  value.  The  same  may  be  re- 
peated of  lawyers,  doctors,  surgeons,  engineers,  or  man- 
agers. Equal  pay  for  equal  work  in  these  cases  might 
give  the  Individual  whose  work  was  of  superior  quality 
many  times  the  income  enjoyed  by  another  individual  in 


198  THIS  ECONOMIC  WORLD 

the  same  occupation  whose  work  was  of  inferior  quality. 
To  insist  upon  equal  pay  for  each  person,  regardless  of 
the  quality  and  quantity  of  work  done,  would  mean  very 
unequal  pay  per  unit  of  work  or  unit  of  value  created. 

A  much  more  difficult  and  somewhat  less  familiar  prob- 
lem arises  when  we  attempt  to  compare  the  economic 
conditions  of  two  different  persons.  Their  condition  may 
be  said  to  be  equal  if  they  have  equal  enjoyment;  or,  if 
one  gets  more  fun  out  of  life  than  the  other,  their  con- 
dition may  be  said  to  be  unequal.  This,  perhaps,  is  too 
much  a  problem  of  temperament  to  be  of  much  interest  to 
the  economist.  The  individual's  capacity  for  enjoyment 
is  probably  beyond  the  power  of  legislative  or  economic 
forces  to  control.  The  quantity  of  goods  consumed  by 
each  individual  comes  somewhat  more  definitely  into  the 
field  of  economic  analysis.  If  two  individuals  consume 
equal  quantities  of  goods,  their  economic  condition  might 
be  said  to  be  equal;  or  unequal  If  they  consume  different 
quantities.  The  quantities  In  this  case  would  probably 
have  to  be  measured  In  terms  of  value  or  price.  We  could 
write  the  sign  of  equality  between  the  consumption  of  two 
individuals  only  if  they  consume  goods  that  cost  equal 
sums  of  money. 

Two  persons  may  consume  equal  quantities  even  though 
their  incomes  are  different,  or  consume  different  quantities 
even  though  they  have  equal  incomes.  One  reason  is  that 
one  may  consume  a  larger  proportion  of  his  income  than 
the  other,  the  other  spending  a  larger  part  of  his  Income 
for  future  development,  either  of  himself,  his  family,  his 
business,  or  his  community.     In  other  words,  he  may  In- 


ECONOMIC  EQUALITY  199 

vest  a  part  of  his  income  for  the  future,  he  may  give  it 
away,  or  otherwise  dispose  of  it  without  actually  consum- 
ing it  himself. 

Instead,  therefore,  of  comparing  the  economic  condi- 
tions of  different  individuals  on  the  basis  of  their  actual 
consumption,  some  may  prefer  to  compare  their  money 
income  and  to  say  that  their  economic  conditions  are  equal 
if  they  have  equal  incomes  or  unequal  if  they  have  unequal 
incomes.  But  again,  there  may  be  a  wide  difference  be- 
tween income  and  the  ownership  of  property.  Many  a 
person  enjoys  a  large  income  who  owns  practically  no 
property — none,  at  least,  beyond  a  few  personal  effects, 
such  as  clothing  and  household  furniture.  Many  an  owner 
of  property  gets  very  little  income  from  it,  so  there  may 
be  great  differences  of  ownership  among  people  who  have 
equal  incomes  or  great  differences  of  Income  among 
people  who  own  equal  quantities  of  property. 

Again,  one  may  own  considerable  property  and  yet  ex- 
ercise very  little  direct  control  over  it.  The  tendency  at 
the  present  time  seems  to  be  toward  a  wider  and  wider 
diffusion  of  ownership  and  greater  and  greater  concentra- 
tion of  control.  This  is  made  possible  by  the  corporate 
method  of  business  organization.  Large-scale  production 
requires  large  quantities  of  capital  for  the  equipment  of  a 
given  industry.  This  capital  may  be  contributed  by 
thousands  or  hundreds  of  thousands  of  small  Investors, 
and  yet  the  actual  management  of  the  corporation  may  be 
concentrated  in  the  hands  of  a  few,  that  is,  in  the  hands 
of  a  small  board  of  directors  and  officials. 

The  question  is,  therefore,  shall  we  compare  the  eco- 


200  THIS  ECONOMIC  WORLD 

nomic  conditions  of  different  Individuals  on  the  basis  of 
their  enjoyment,  of  their  consumption,  of  their  incomes, 
of  their  property,  or  of  their  control  over  property?  In 
this  country,  at  the  present  time,  it  seems  that  the  in- 
equalities Increase  as  we  proceed  from  one  basis  to  another 
in  the  order  In  which  they  have  been  named;  that  is,  the 
Inequalities  of  enjoyment  are  usually  much  less  than  the 
inequahties  of  consumption,  the  Inequalities  of  consump- 
tion less  than  those  of  income,  the  inequalities  of  income 
less  than  those  of  ownership,  and  the  Inequalities  of 
ownership  less  than  those  of  control  or  management.  In 
other  words,  the  greatest  inequalities  are  found,  first,  in 
control  or  management,  second.  In  ownership,  third,  in 
Income,  fourth,  in  consumption,  and  last,  in  enjoyment. 
Certainly,  this  is  the  case  If  we  except  the  very  poorest 
classes,  who  may  be  suffering  from  physical  want,  and 
consider  only  those  classes  who  are  above  that  basic  line 
of  actual  physical  suffering. 

The  difference  In  enjoyment  to  be  derived  from  a  Ford 
and  from  a  Rolls-Royce  is  by  no  means  commensurate 
with  the  difference  in  the  cost.  Doubtless  a  high-powered 
and  expensive  automobile  gives  more  satisfaction  than  a 
cheap  one,  but  the  Increase  in  satisfaction,  under  the  mar- 
ginal analysis,  does  not  keep  pace  with  the  Increase  in 
cost.  A  small  cottage  or  a  neat  appartment  can  hardly  be 
expected  to  furnish  as  much  total  satisfaction  as  a  mansion 
or  an  expensive  suite,  but  here  again  the  increase  In  satis- 
faction does  not  increase  in  proportion  to  the  increase  In 
cost.  One  article  of  consumption  may  cost  ten  times  as 
much  as  another,  but  it  usually  does  not  furnish  ten  times 


ECONOMIC  EQUALITY  201 

as  much  satisfaction  or  enjoyment.  If  it  furnishes  even 
twice  as  much,  it  is  doing  pretty  well. 

In  this  country  the  differences  in  consumption — in  the 
money  spent  for  consumers'  goods — are  generally  less 
than  differences  in  income,  even  though  we  consider  only 
net  income  after  taxes  are  deducted.  The  classes  with 
large  incomes  have,  in  the  past,  done  most  of  the  investing 
in  new  enterprises  and  have  made  the  largest  contributions 
to  public  causes.  In  other  words,  they,  on  the  average, 
actually  consumed  a  smaller  percentage  of  their  incomes 
than  the  classes  with  smaller  incomes.  This  is  probably 
still  the  case,  though  we  are  finding  at  the  present  time 
that  large  numbers  of  people  with  relatively  small  incomes 
are  furnishing  a  great  deal  of  capital,  either  directly  or 
indirectly,  for  the  financing  of  new  enterprises.  Some- 
times they  furnish  it  directly  by  investing  in  the  bonds  or 
stocks  of  corporations.  More  frequently  they  furnish  it 
indirectly  by  depositing  in  savings  banks  or  buying  life 
insurance  or  paying  dues  to  labor  unions,  which  dues  are 
accumulated  in  considerable  funds  and  sometimes  invested 
In  productive  ways. 

It  is  demonstrable  that  differences  of  income  are  less 
than  differences  of  ownership  of  property.  Large  num- 
bers of  families  own  no  property  at  all  except,  as  stated 
above,  their  personal  effects  and  household  furniture. 
The  number  of  families  that  receive  no  income  is  a  negli- 
gible fraction.  And  finally,  ownership  is  much  less  con- 
centrated than  control,  and  the  difference  is  becoming 
greater  from  year  to  year.  Larger  and  larger  numbers 
of  people  are  investing  In  the  shares  of  corporations. 


202  THIS  ECONOMIC  WORLD 

There  is  a  phenomenal  increase  in  the  number  who  hold 
insurance  policies.  The  holder  of  an  insurance  policy,  in 
an  indirect  way,  owns  the  assets  of  the  insurance  company 
and  also  the  securities  in  which  the  insurance  company  has 
invested  its  funds.  The  control  of  the  assets  of  the  insur- 
ance company  is,  of  course,  in  the  hands  of  a  small  group, 
as  are  the  affairs  of  the  industrial  corporations  in  which 
they  have  been  invested. 

Most  of  the  startling  figures  regarding  the  awful  con- 
centration of  wealth  in  this  country  relate  to  the  control 
of  industry  or  to  the  ownership  of  it.  Figures  as  to  the 
inequalities  of  income  are  somewhat  alarming,  but  they 
do  not  furnish  the  alarmist  with  quite  so  much  thunder  as 
those  which  relate  to  ownership  or  control.  Inequalities 
of  consumption  are  seldom  mentioned  except  to  point  out 
some  of  the  extreme  cases  of  dire  poverty  or  of  senseless 
extravagance.  Inequalities  of  enjoyment  are  never  used 
to  excite  a  crowd  at  a  ball  game,  a  movie  theater,  or  even 
at  a  political  meeting.  The  masses  of  the  people  on 
whom  elections  depend  experience  such  small  differences 
of  actual  enjoyment  as  to  make  them  complacent,  even 
while  listening  to  speeches  on  the  awful  concentration  of 
wealth  in  the  country.  They  all  realize  that  one  person 
in  this  great  middle  group  that  includes  the  mass  of  the 
people  has  about  as  much  fun  as  another. 

With  all  the  differences  in  personal  income  that  still 
exist — and  they  are  considerable — the  case  is  not  so 
alarming  as  it  might  be  made  to  sound  as  long  as  these 
differences  of  personal  income  are  a  reflection  of  differ- 
ences in  the  quantity  or  especially  in  the  quality  of  the 


ECONOMIC  EQUALITY  203 

work  done.  But  it  is  practically  impossible  to  compare 
either  the  quantity  or  the  quality  of  the  work  done  by  two 
men  who  are  engaged  in  widely  different  occupations.  It 
may  be  difficult  to  say  which  of  two  actors  is  the  better 
actor  or  which  does  the  higher  quality  of  work,  but  that 
difficulty  is  by  no  means  so  great  as  it  would  be  to  say 
whether  a  given  actor  does  better  work  than  a  given  stone 
mason.  In  the  latter  case  the  difficulty  is  insurmountable. 
The  nearest  approximation  we  can  probably  make  to  a 
valid  comparison  would  be  to  say,  more  or  less  arbitrarily, 
that  the  work  of  a  first-rate  stone  mason  is  probably  of  as 
high  quality  as  the  work  of  a  first-rate  actor,  that  of  a 
mediocre  stone  mason  as  that  of  a  mediocre  actor,  and 
that  of  a  poor  stone  mason  as  that  of  a  poor  actor;  that 
Is,  to  assume  that  different  occupations  are  of  about  equal 
merit  as  to  quality  and  that  the  man  who  does  excellent 
work  in  one  is  probably  doing  work  of  as  high  quality  as 
the  man  who  does  excellent  work  in  another.  On  the 
basis  of  this  sort  of  assumption,  we  should  have  to  con- 
clude that  occupational  equality  of  income  is  desirable,  or, 
in  other  words,  that  the  average  income  throughout  one 
worthy  and  useful  occupation  should  be  about  as  high  as 
the  average  income  in  any  other  useful  and  worthy  occu- 
pation. 

More  definite  comparisons  may  be  made  between 
workers  in  the  same  occupation.  It  would  be  fairly  easy, 
for  example,  to  determine  whether  one  stone  mason  does 
a  larger  quantity  of  work  than  another.  It  would  be 
somewhat  more  difficult,  but  by  no  means  impossible,  to 
determine  whether  one  did  work  of  a  higher  quality  than 


204  THIS  ECONOMIC  WORLD 

another.  The  same  might  be  said  of  those  who  follow 
any  other  occupation.  So  long  as  they  are  doing  the  same 
kind  of  work,  both  quantitative  and  qualitative  compari- 
sons are  possible.  On  this  basis  we  could  justify  con- 
siderable inequalities  of  personal  income  within  a  given 
occupation  if  we  assume  that  equal  pay  for  work  of  equal 
quantity  and  quality  is  desirable.  We  could  scarcely 
justify  higher  average  income  in  one  occupation  than  in 
another  for  the  reason  suggested  above,  that  it  is  impos- 
sible to  compare  entirely  different  kinds  of  work  on  the 
basis  either  of  quantity  or  quality. 

In  comparing  the  incomes  earned  by  people  in  different 
occupations,  we  must  have  in  mind  average  incomes  rather 
than  extremes.  The  mere  fact  that  one  movie  actor  re- 
ceives a  vastly  larger  income  than  any  plumber  or  stone 
mason  receives  does  not  in  itself  indicate  that  the  occupa- 
tion of  the  movie  actor  is,  on  the  whole,  more  prosperous 
than  that  of  the  plumber  or  stone  mason.  The  failures 
as  well  as  the  successes  must  be  taken  into  consideration. 
Again,  the  mere  fact  that  one  business  manager  receives 
a  much  larger  income  than  any  manual  worker  does  not 
prove  anything.  Moreover,  the  fact  that  one  indepen- 
dent business  man  who  assumes  most  of  the  risks  of 
business  happens  to  win  a  very  large  income  must  be  bal- 
anced against  the  large  number  of  failures  in  this  haz- 
ardous occupation.  As  a  matter  of  fact,  in  spite  of  all 
that  has  been  written  against  profits,  it  has  not  yet  been 
shown  that  business  men  as  a  class  make  any  profits  at  all. 

In  order  to  elucidate  this  point,  it  is  necessary  to  refer 
to  one  of  the  commonest  of  all  statistical  errors,  that  of 


ECONOMIC  EQUALITY  205 

taking  a  selected  body  of  cases  and  basing  one's  statistical 
calculations  upon  that  selected  list.  For  example,  those 
who  make  a  study  of  conspicuous  geniuses  are  Impressed 
with  the  capacity  of  the  men  whom  they  study  to  forge 
ahead  and  do  great  things  In  spite  of  adverse  circum- 
stances. Basing  their  conclusions  on  this  selected  body 
of  cases,  they  are  very  likely  to  reach  the  conclusion  that 
the  born  genius  Is  more  or  less  independent  of  circum- 
stances or  environment  and  that  he  will  achieve  success  In 
spite  of  a  bad  environment.^  The  difficulty  with  this  con- 
clusion is  that  the  cases  studied  have  been  automatically 
selected  by  circumstances.  Only  those  who  have  achieved 
a  reputation  as  geniuses  are  studied,  and  these  are  obvi- 
ously the  ones  whom  circumstances  could  not  down.  The 
statistician  has  no  means  whatsoever  of  finding  out 
whether  there  may  not  have  been  hundreds  of  other  cases 
of  potential  geniuses  who  never  achieved  standing  as 
geniuses  because  of  adverse  circumstances. 

Another  error  of  the  same  kind  Is  made  by  those  who 
study  cases  of  the  opposite  sort — the  failures  of  life  or 
those  who  turn  criminal.  Those  who  actually  commit 
crime  in  the  face  of  all  the  discouragements  that  society 
places  in  their  way  In  the  form  of  threats  of  punishment 
are  obviously  those  whom  threats  of  punishment  did  not 
deter  from  the  commission  of  crime.  Confining  their 
attention  to  these  selected  cases,  certain  investigators  have 
reached  the  conclusion  that  fear  of  punishment  does  not 
deter  from  crime.     The  only  conclusion  which  they  are 


^This  was   Galton's  conclusion.     See  Hereditary  Genius    (New  York, 
The  Macmillan  Company,  1892),  pp.  34-35. 


2o6  THIS  ECONOMIC  WORLD 

justified  in  reaching — that  is,  the  only  conclusion  which  is 
contained  in  the  premises — is  that  those  who  actually 
committed  crime  in  the  face  of  threats  of  punishment  were 
not  deterred  by  those  threats  of  punishment  from  com- 
mitting crime,  which  is  precisely  what  they  knew  before 
they  began  their  investigations.  The  statistician  has  no 
means  whatsoever  of  finding  out  how  many  cases  would 
have  committed  crime  had  there  been  no  threat  of  punish- 
ment. 

These  two  illustrations  are  used  merely  to  show  the 
prevalence  of  that  fallacious  method  of  reasoning  in  other 
fields  than  that  of  economics.  A  student  in  economics  who 
finds  that  those  business  men  who  have  remained  in  busi- 
ness for  a  long  period  of  time  are  actually  making  profits 
and  that  all  their  profits  amount  to  a  considerable  sum 
is  also  studying  a  selected  body  of  cases.  The  trial  and 
error  of  business  competition  has  eliminated  the  failures 
and  preserved  the  successes,  and  by  confining  his  attention 
to  those  that  were  preserved  and  omitting  all  those  that 
failed,  the  investigator  reaches  a  false  or  at  least  an 
unproved  conclusion,  namely,  that  business  men  as  a  class 
make  profits  or  that  the  profits  of  those  who  succeed  more 
than  balance  the  losses  of  those  who  fail. 

In  general,  those  occupations  which  show  the  most  con- 
spicuous fortunes,  such  as  acting  for  the  movies  and  under- 
taking new  business  enterprises,  are  the  ones  that  experi- 
ence has  proved  to  be  most  hazardous  and  in  which  we 
find  the  largest  percentage  of  failures.  Bearing  this  fact 
in  mind,  we  shall  probably  reach  the  conclusion  that  occu- 
pational inequality  in  this  country  is  much  less  than  has 


ECONOMIC  EQUALITY  207 

commonly  been  imagined.  This,  however,  is  not  denying 
that  there  are  still  great  inequalities  in  the  prosperity  of 
different  occupations. 

The  idea  of  equal  pay  for  equal  work  involves  another 
problem  of  some  difficulty,  that  is,  if  we  go  beyond  the 
crude  labor-time  method  of  comparing  work  and  leave  out 
questions  of  quality  altogether.  That  is  the  question  of 
appraising  the  real  value  of  work.  How  much  is  a  given 
thing  worth,  whether  we  are  considering  a  commodity  or 
a  service? 

In  order  to  answer  this  question  we  must  consider  two 
rival  theories  of  value,  namely,  the  cost  theory  and  the 
utility  theory.  Not  only  in  the  field  of  economics  but  in 
the  field  of  morals  as  well,  a  great  many  people  in  the  past 
have  assumed  that  value  was  closely  correlated  with  cost 
or  sacrifice.  Not  only  was  the  value  of  an  economic  good 
supposed  to  be  determined  by  the  cost  or  sacrifice  involved 
in  producing  it,  but  the  merit  of  an  act  or  of  a  form  of 
conduct  was  supposed  in  some  way  to  depend  upon  the 
sacrifice  incurred  by  the  doer.  However  useful  an  act 
might  be,  if  it  cost  the  doer  no  sacrifice,  it  has  frequently 
been  assumed  that  he  acquired  no  merit  by  his  perform- 
ance. By  the  same  reasoning,  however  useless  an  act 
might  be.  If  the  doer  incurred  a  heavy  sacrifice  in  doing 
it,  in  some  way  it  was  supposed  to  redound  to  his  credit. 

From  the  standpoint  of  antiquity,  perhaps  also  from 
the  standpoint  of  the  weight  of  written  opinion,  this 
theory  has  some  advantage  over  the  utility  theory.  The 
latter  theory,  however,  has  some  other  advantages.  Un- 
der this  theory  the  value  of  an  object  or  a  deed  is  in 


2o8  THIS  ECONOMIC  WORLD 

proportion  to  its  usefulness  rather  than  in  proportion  to 
its  cost.  A  work  of  art  may  have  cost  its  producer  noth- 
ing in  the  way  of  sacrifice;  he  may  have  enjoyed  every 
minute  of  the  work  of  its  production,  and  yet  the  product 
may  be  of  the  very  greatest  value.  The  product  of  a 
bungling,  uninspired  artist  may  have  been  produced  by 
hours  of  wearisome  and  tedious  labor  and  yet  be  worth 
nothing.  According  to  the  utility  theory,  there  is  a  much 
closer  correlation  between  usefulness  and  value  than  there 
is  between  cost  and  value. 

Whatever  the  weight  of  written  opinion  may  be  as  to 
the  respective  merits  of  these  two  theories,  in  the  making 
of  practical,  everyday  choices  the  mass  of  mankind  regu- 
larly and  consistently  act  upon  their  concept  of  utility 
rather  than  their  concept  of  cost  in  evaluating  things  and 
services.  We  generally  pay  for  a  thing  in  proportion  to 
how  much  we  want  it  without  regard  to  how  much  it  cost 
the  producer.  While  our  desire  is  not  necessarily  a 
measure  of  utility,  yet  we  ourselves  generally  think  that  it 
is  at  the  time  when  the  desire  is  felt.  As  to  other  people's 
desires,  we  may  feel  quite  certain  that  they  are  unsound. 
Even  our  own  desires  of  yesterday  may  seem  quite  foolish 
today.  However,  we  need  not  quibble  over  such  ques- 
tions. It  is  fairly  certain  that  we  evaluate  things  more 
nearly  in  accordance  with  what  we  think  their  utility  to 
be  than  in  accordance  with  what  we  think  their  cost  to 
have  been. 

Some  confusion  of  thought  has  arisen  on  this  subject, 
especially  among  those  who  deliver  written  opinions  upon 
it,  because  of  their  failure  to  focus  attention  upon  the 


ECONOMIC  EQUALITY  209 

actual,  specific  thing  that  is  evaluated,  or  because  of  their 
tendency  to  focus  attention  rather  upon  the  class  to  which 
it  belongs  or  even  upon  a  sort  of  Platonic  concept  of  the 
thing  "in  itself."  Not  infrequently  is  it  stated  that  the 
most  useful  things  in  the  world  have  no  value.  Air  is 
used  as  a  common  illustration.  This  statement  of  opinion, 
however,  fails  to  distinguish  between  air  in  general  and  a 
concrete  quantity  of  air,  such  as  a  cubic  yard.  As  a  mat- 
ter of  fact,  we  do  not  buy  and  sell  things  in  general.  We 
buy  and  sell  specific  quantities  or  units  of  these  things. 
We  are  seldom  called  upon  to  evaluate  the  horse  in  gen- 
eral. Every  buyer  and  seller  of  horses,  however,  is 
called  upon  to  evaluate  some  particular  horse.  If  that 
particular  horse  is  much  wanted,  or  if  there  are  indi- 
viduals who  think  it  would  be  highly  useful  to  them,  they 
will  consider  this  a  sufllicient  reason  for  paying  a  high 
price  for  it,  regardless  of  the  value  of  the  horse  in  gen- 
eral to  mankind  at  large. 

In  some  well  watered  countries  the  value  of  a  gallon  of 
water  is  very  small  for  the  simple  reason  that  that  par- 
ticular gallon  is  not  desired  by  any  particular  person,  in 
spite  of  the  fact  that  it  could  be  demonstrated  that  water 
in  general  was  worth  infinite  sums  to  mankind  in  general. 
In  other  locations  a  particular  gallon  of  water  may  com- 
mand a  price  because  it  is  strongly  desired  by  certain 
definite  persons.  They  consider  that  particular  gallon  to 
be  highly  useful  to  them.  The  same  method  of  reasoning 
must  apply  to  everything  that  is  evaluated.  Labor  in 
general  may  be  highly  useful  to  mankind  in  general,  where 
the  labor  of  a  particular  man  may  not  be  worth  anything 


210  THIS  ECONOMIC  WORLD 

to  anybody  In  particular  for  the  reason  that  he  is  not  able 
to  do  anything  that  anybody  wants  done.  It  would  be 
useless  for  him  to  demand  a  high  price  for  his  labor  on  the 
ground  that  labor  in  general  was  worth  infinite  sums  to 
mankind  in  general. 

Confining  our  attention,  therefore,  to  specific  units  or 
quantities  and  to  the  circumstances  of  time  and  place 
when  and  where  they  happen  to  be  found,  we  find  a  very 
close  correlation  between  the  desirability  of  a  thing  and 
its  value,  or  the  evaluation  which  men  place  upon  it.  In 
so  far  as  there  is  a  divergence  between  desirability  and 
usefulness,  it  is  mainly  due  to  mistaken  opinion  as  to  use- 
fulness. 

The  apparent  divergence  between  many  written 
opinions  on  value  and  the  practical  choices  that  men  make 
in  everyday  life  is  generally  based  upon  a  difference  in  the 
things  that  are  really  being  considered.  One  who  gives 
forth  a  written  opinion  is  more  likely  to  be  thinking  about 
abstractions,  to  be  considering  such  abstract  questions  as 
what  the  horse  is  worth  to  mankind,  or  what  air  or  water 
is  worth  to  mankind,  than  about  the  question  of  what  a 
given  horse  is  worth  to  the  men  who  are  thinking  about 
buying  it,  or  how  much  a  given  cubic  yard  of  air  or  a  given 
gallon  of  water  is  worth  to  possible  buyers.  But  in  the 
practical  choices  made  by  everyday  men  in  their  dealings 
with  one  another  they  almost  never  have  in  mind  these 
general  or  abstract  questions.  They  are  fundamental 
realists,  dealing  with  concrete  things  in  particular  situa- 
tions. In  this  sense  at  least  we  are  safe  in  saying  that 
their  estimates  of  utility  rather  than  their  estimates  of 


ECONOMIC  EQUALITY  211 

cost  determine  the  value  which  they  place  upon  a  thing  or 
a  service. 

The  contrast  between  the  two  theories  is  well  expressed 
by  a  leading  humorist  who  makes  one  of  his  characters 
say  that  a  hat  is  worth  as  much  as  It  cost,  to  which  the 
other  replies  that  "a  hat  Is  worth  as  much  as  I  want  it." 

From  the  standpoint  of  social  well-being,  the  utility 
theory  of  value  has  more  applications  than  the  cost 
theory.  If  a  thing  is  very  useful,  it  is  highly  Important 
that  Its  production  should  be  stimulated.  If  it  is  not  very 
useful.  It  is  not  very  Important  that  Its  production  be 
stimulated.  One  way  of  stimulating  the  production  of  a 
thing  that  is  very  useful  or  much  needed  is  to  reward  men 
for  producing  it.  Rewards,  of  course,  may  be  of  many 
kinds  but  they  must  have  at  least  one  characteristic  In 
common  :  they  must  be  something  desired  by  the  producer. 
To  give  him  something  that  he  does  not  care  for  is  no 
reward  at  all.  If  he  cares  for  money,  the  offer  of  money 
Is  the  offer  of  a  reward.  If  he  cares  for  popularity  or 
esteem,  then  these  are  rewards.  The  man  who  produces 
something  that  is  very  useful  or  much  needed  may  be  en- 
couraged by  offering  him  any  of  these  things  that  he  hap- 
pens to  desire.  If  this  Is  done,  however,  the  one  who 
produces  a  thing  which  Is  much  needed  will  receive  a 
larger  reward  than  the  one  who  produces  a  thing  which 
is  not  much  needed. 

We  would  not  escape  from  this  situation  even  If  we 
gave  up  all  pecuniary  rewards  and  offered  social  esteem  as 
the  reward  for  doing  useful  things.  If  one  received  more 
social  esteem  than  another,  there  would  be  inequality  of 


212  THIS  ECONOMIC  WORLD 

reward  just  as  definitely  as  though  one  received  more 
money  than  another.  The  dilemma  is  unescapable.  If 
men  do  not  care  for  esteem,  it  is  no  reward  and  will  not 
stimulate  endeavor.  If  they  do  care  for  it,  inequalities  of 
reward  will  produce  exactly  the  same  jealousies  and  heart- 
burnings when  the  reward  takes  the  form  of  social  esteem 
as  when  it  takes  the  form  of  money.  The  same  problems 
of  justice  would  arise  out  of  the  inequalities  in  the  distri- 
bution of  esteem  as  now  arise  out  of  the  inequalities  in  the 
distribution  of  money.  Moreover,  the  debasing  effects 
on  personal  character  are  quite  as  great  in  the  case  of  an 
inordinate  love  of  esteem  as  in  that  of  an  inordinate  love 
of  money. 

If  we  adhere  to  the  very  reasonable  opinion  that  justice 
consists  in  rewarding  people  in  proportion  as  they  con- 
tribute to  general  well-being,  which  would  seem  to  be  a 
corollary  of  the  utility  theory  of  value,  then  justice  would 
require  that  he  who  produces  a  thing  of  one  kind  or  an- 
other which  is  much  needed  should  receive  a  larger  reward 
than  he  who  produces  a  thing  which  is  not  much  needed. 
To  reward  them  equally,  regardless  of  the  usefulness  of 
the  things  done,  would,  from  this  point  of  view,  be  posi- 
tive injustice.  In  other  words,  justice  does  not  reward 
equally  except  in  those  cases  where  the  work  or  the 
product  is  of  equal  utility. 

The  utility  of  a  product  or  a  service  is  in  proportion  to 
the  intensity  of  the  need  which  it  satisfies.  It  is  neces- 
sary, in  order  to  determine  the  intensity  of  a  given  need, 
to  find  out  how  nearly  it  is  satiated.  If  there  were  very 
little  water  to  be  had,  the  need  for  water  would  be  very 


ECONOMIC  EQUALITY  213 

great,  and  he  who  would  bring  an  extra  gallon  of  water 
to  a  community  thus  situated  would  be  rendering  a  very 
great  service.  Where  water  Is  abundant  and  the  need 
not  very  great,  It  would  be  no  great  service  to  bring  more 
water.  This  Is  a  principle  that  applies  to  every  possible 
product  or  service.  The  engineer  who  would  conduct 
water  to  a  dry  region  does  a  more  useful  thing  than  the 
one  who  conducts  water  to  a  region  that  is  already  well 
supplied.  If  usefulness  Is  to  be  the  measure  of  reward, 
the  reward  of  the  former  should  be  greater  than  that  of 
the  latter,  whether  the  reward  takes  the  form  of  esteem 
or  money. 

The  same  principle  applies  to  different  kinds  of  work 
that  have  to  be  coordinated  in  the  production  of  a  given 
commodity.  In  the  construction  of  irrigation  works,  an 
engineer  may  be  more  needed  than  a  ditch  digger,  for  the 
simple  reason  that  there  are  fewer  engineers.  One  ditch 
digger  more  or  less  might  make  very  little  difference  in 
the  speed  with  which  dry  areas  could  be  Irrigated.  One 
engineer  more  or  less  might  make  a  great  deal  of  differ- 
ence. In  such  a  situation  It  is  much  more  Important  to 
the  community  that  it  stimulate  the  immigration  or  the 
training  of  engineers  than  of  ditch  diggers.  One  good 
way  of  stimulating  the  immigration  or  the  training  of 
engineers  is  to  offer  them  what  they  want — money,  es- 
teem, power,  or  something  else.  If  this  is  done,  however, 
engineers  will  be  receiving  more  than  ditch  diggers — not 
because  they  work  harder  or  because  the  work  costs  them 
any  more  fatigue,  but  because  of  the  sheer  fact  that  their 
work  is  worth  more  to  the  community. 


214  THIS  ECONOMIC  WORLD 

If  we  could  imagine  a  community  in  which  the  opposite 
conditions  prevailed — that  is,  one  in  which  there  was  a 
surplus  of  engineers  but  few  who  had  the  strength,  skill, 
or  willingness  to  dig  ditches — in  such  a  case  irrigation 
would  be  facilitated  more  by  getting  a  few  additional 
ditch  diggers  than  by  getting  a  few  additional  engineers, 
or  retarded  more  by  losing  a  few  ditch  diggers  than  by 
losing  a  few  engineers.  It  would  be  to  the  interest  of  the 
community  to  try  to  stimulate  the  immigration  of  ditch 
diggers,  and  one  way  of  doing  that  would  be  to  offer  them 
large  rewards  for  coming.  If  value  is  based  on  utility,  a 
ditch  digger  would  then  be  worth  more  than  an  engineer. 
If  justice  is  based  on  value,  it  would  be  just  that  he  should 
receive  more  than  an  engineer.  Equal  pay  for  work  of 
equal  utility  would  result  in  very  unequal  pay  for  different 
persons. 

There  are  still  other  difficulties  in  the  way  of  a  per- 
fectly clear  understanding  of  equality.  One  of  these 
arises  from  the  fact  that  there  are  certain  large  utilities 
and  disutilities  that  come  to  all  alike,  in  which  there  is 
substantial  equality,  or  if  there  are  inequalities,  these 
inequalities  are  entirely  independent  of  such  things  as 
material  wealth  or  the  individual's  standing  in  the  com- 
munity. Moreover,  these  utilities  and  disutilities,  which 
are  the  heritage  of  our  common  humanity,  loom  large  in 
the  eyes  of  those  who  understand  and  make  such  things 
as  differences  in  material  wealth  and  social  esteem  seem 
trivialities.  The  best  things  in  life  are  open  to  all  alike. 
Only  the  marginal,  the  less  important,  things  are  unequally 
distributed.     The  sunlight,  the  air,  the  sky,  the  clouds,  the 


ECONOMIC  EQUALITY  215 

foliage,  family  affection,  friendships,  are  the  things  we 
would  miss  most  if  we  were  deprived  of  them,  and  yet 
they  are  distributed  with  some  degree  of  equality. 

We  are,  however,  so  constituted  as  to  make  us  ordi- 
narily indifferent  to  such  things.  For  excellent  evolu- 
tionary reasons,  we  have  been  compelled  through  thou- 
sands of  generations  to  Ignore  or  forget  the  things  that 
are  sufficient  and  to  concentrate  our  attention  upon  the 
things  that  happen  to  be  scarce.  There  was  no  survival 
value  in  taking  thought  for  things  that  we  already  pos- 
sessed In  sufficient  abundance.  If  there  Is  anything  of 
which  you  can  say,  "More  of  it,  more  well-being,  less  of 
it,  less  well-being,"  that  Is  the  thing  to  which  we  must 
devote  our  attention  If  we  are  to  improve  our  well-being. 
Devoting  attention  to  such  things  has  always  had  survival 
value.  There  was  no  similar  reason  why  we  should  de- 
vote our  attention  to  other  things.  Survival  or  extinc- 
tion has  depended  upon  our  ability  to  get  more  of  the 
things  that  we  lacked,  not  upon  our  getting  more  of  the 
things  of  which  we  had  an  abundance.  Our  motives  and 
our  sense  of  values  have  developed  In  response  to  this 
need  till  we  have  become  a  kind  of  being  whose  sense  of 
value  is  determined  by  the  fact  of  scarcity.  Where  there 
is  need  for  action,  there  Is  need  for  a  motive  to  action. 
There  is  need  for  action  with  respect  to  anything  that  Is 
scarce,  and  evolutionary  selection  has  to  preserve  those 
whose  motives  to  productive  action  have  been  determined 
by  the  fact  of  scarcity. 

Of  course,  we  have  also  been  powerfully  motivated  to 
destructive   action.     The    evolutionary   purpose   of   this 


2i6  THIS  ECONOMIC  WORLD 

motivation  has  been  to  stimulate  us  to  exterminate  that 
which  was  so  abundant  as  to  threaten  our  extinction. 
Whether  the  objects  which  threatened  our  extinction  were 
human  or  subhuman  enemies,  in  either  case  our  well-being 
was  increased  as  they  were  thinned  out.  This  militant  or 
destructive  action  which  leads  to  the  thinning  out  of  other 
objects,  and  economic  or  productive  action  which  leads  to 
the  increase  of  the  objects  of  such  action,  have  both  been 
determined  by  survival  values.  This  explains  why,  in 
spite  of  the  fact  that  the  larger  utilities  of  life  come  to  all 
alike,  we  are  always  worried  about  the  few  and  unimpor- 
tant things  that  are  now  scarce.  In  a  militant  age  we 
were  greatly  worried  about  the  things  that  were  too  abun- 
dant. Such  things  have  now  been  reduced  to  the  category 
of  weeds,  insect  pests,  and  disease  germs.  The  useful 
things  concerning  which  we  are  worried  because  of  their 
scarcity,  or  the  things  which  occupy  so  large  a  place  in 
our  everyday  thinking,  are  commonly  called  wealth. 

They  not  only  loom  large  in  our  everyday  occupations, 
but  their  inequahtles  worry  us  more  than  things  of  ulti- 
mately greater  consequence.  Any  Inequality  In  the  pos- 
session of  scarce  things  makes  a  deeper  impression  on  us 
than  the  equalities  that  exist  with  respect  to  things  that 
are  sufficient  for  everybody. 

In  spite  of  the  vast  amount  of  alarmist  literature  that 
has  been  issued  during  the  last  two  generations  on  the 
subject  of  the  appalling  inequalities  of  wealth,  a  strange 
and  almost  unaccountable  complacency  has  been  shown  by 
the  masses  of  people.  If  the  somewhat  startling  figures 
concerning  the  concentration  of  wealth  meant  what  the 


ECONOMIC  EQUALITY  217 

alarmists  have  tried  to  make  them  mean,  this  complacency 
could  be  explained  only  on  the  ground  of  extreme  stu- 
pidity. 

Why  have  the  people  remained  so  complacent?  The 
explanation  Is  probably  found  In  the  facts  that  have  been 
pointed  out  In  this  chapter.  First,  that  the  really  great 
utilities  and  disutilities  come  to  all  alike,  without  regard 
to  differences  of  wealth  or  popular  esteem;  second,  that 
even  with  respect  to  material  wealth,  the  differences  in 
actual  enjoyment  are  much  less  than  the  differences  of 
ownership  and  still  less  than  the  differences  of  control. 
The  masses  of  the  people  have  recognized  the  necessity  of 
concentrated  control  if  we  are  to  have  large  organizations 
functioning  in  either  Industry  or  government.  They  have 
realized  that  this  concentration  of  control  does  not  neces- 
sarily mean  concentration  of  enjoyment,  but  that  a  con- 
siderable degree  of  concentration  is  consistent  with  a 
rather  wide  diffusion  of  money  incomes  and  with  a  still 
wider  diffusion  of  enjoyment. 

Of  course  there  is,  In  addition  to  all  this,  a  certain  skep- 
ticism as  to  the  actual  validity  of  the  alarmist's  figures  as 
to  concentration.  Figures  might  actually  show  a  high  de- 
gree of  concentration  of  control  even  though  there  was  an 
absolute  equality  of  satisfactions  enjoyed  or  even  of 
money  incomes.  To  begin  with,  under  our  system,  which 
is  sometimes  called  Individualistic  but  which  Is  more  prop- 
erly, in  many  of  its  aspects  famllistic,  it  might  easily  be 
shown  that  the  great  majority  of  our  people  have  no  in- 
comes at  all;  that  Is,  the  women  and  children  of  many 
families  are  not  actually  earning  Incomes.     Suppose  half 


2i8  THIS  ECONOMIC  WORLD 

the  income  receivers  own  no  property  outside  of  clothes 
and  household  furniture.  This  would  show  a  great  deal  of 
concentration  of  property,  in  spite  of  the  fact  that  there 
was  inequality  of  incomes  among  families.  Then,  if  the 
property  were  owned  by  large  organizations,  either  co- 
operative societies  or  joint  stock  companies,  the  control  of 
it  would  be  still  further  concentrated  in  the  hands  of  a  few 
directors.  Even  though  there  were  absolute  equality  in 
the  essential  thing,  namely,  satisfaction — which,  of  course, 
there  was  not — someone  could  show  a  very  high  degree  of 
concentration  in  ownership  or  control. 

Suppose,  for  example,  there  was  what  we  call  occupa- 
tional equality;  that  is,  that  one  occupation,  on  the  aver- 
age, counting  all  the  ins  and  outs,  attractions  and  repul- 
sions, gains  and  losses,  was  about  as  prosperous  as  any 
other.  There  might  still  be  considerable  differences  of 
personal  income  within  each  occupation.  Suppose,  in  ad- 
dition to  all  this,  that  in  the  average  family  of  four  people 
only  the  head  of  the  family  received  an  income.  Then 
someone  could  truthfully  say  that  75%  of  the  people  have 
no  income,  that  the  entire  national  income  is  concentrated 
in  the  hands  of  25%.  Suppose  it  were  further  true  that 
half  the  income  receivers  own  no  capital.  It  could  fur- 
ther be  said  that  i2>^%  of  the  people  of  the  United 
States  own  all  the  capital  and  that  87^%  own  none.  If 
there  were  enough  personal  inequalities  within  certain  oc- 
cupations to  show  still  further  concentration,  even  though 
there  were  equality  as  among  occupations,  this  inequality 
might  be  still  further  reduced  to  a  much  smaller  percen- 
tage, say  6j4  %'    In  that  case,  in  spite  of  the  fundamental 


ECONOMIC  EQUALITY  219 

equality,  the  figures  would  still  show  that  6>^%  of  the 
population  owned  all  the  capital.  If  a  large  proportion 
of  this  property  were  owned  by  cooperative  societies  and 
joint  stock  corporations,  it  might  then  be  true  that  much 
less  than  1%  of  the  people  controlled  99%  of  the  capital. 
These  figures  might  be  strictly  correct,  and  yet  there 
might  be  fundamental  equality  throughout  the  country — 
equality  of  average  money  income  among  occupations, 
equality  of  enjoyment  on  the  average  among  those  ply- 
ing different  occupations,  and  so  on.  Under  these  condi- 
tions the  consciousness  on  the  part  of  the  common  run  of 
citizens  that  they  were  all  having  an  equally  good  time,  so 
far  as  this  is  dependent  upon  material  wealth,  would  natu- 
rally give  a  feeling  of  complacency  even  on  the  part  of 
the  intelligent  majority.  In  other  words,  the  complacency 
that  would  be  shown  under  such  conditions  would  not  be 
due  to  ignorance  but  to  intelligence  and  discrimination. 

It  is  probable  that  we  are  approximating  much  more 
nearly  to  this  ideal  of  equality  In  the  United  States  than 
most  of  us  have  been  able  to  realize.  It  is  certainly  true 
that  there  is  no  inherent  reason  why  we  might  not,  at  some 
time  in  the  near  future,  approximate  pretty  closely  to  It. 
We  seem,  at  the  present  time,  to  be  making  definite  prog- 
ress in  that  direction. 


VII 
EQUALITY  BEFORE  THE  LAW 


EQUALITY  before  the  law  was  the  unvarying  ob- 
jective in  the  construction  of  the  American  govern- 
ment. Its  founders  had  been  suffering  from  a  government 
before  which  all  men  were  not  equal,  especially  those  who 
lived  in  its  colonies.  As  evidence  that  their  brethren  in 
Great  Britain  enjoyed  a  reasonable  degree  of  equality  be- 
fore the  law,  these  colonists  had  but  to  read  the  Commen- 
taries on  the  Lazv  of  England  by  Sir  William  Blackstone. 
Ten  years  before  the  beginning  of  the  American  Revolu- 
tion this  great  classic  had  been  published;  it  expounded 
laws  and  usages  of  long  standing. 

The  idea  and  practice  of  this  political  or  civil  liberty  flourish  in 
their  highest  vigor  in  these  kingdoms,  where  it  falls  little  short  of 
perfection,  and  can  only  be  lost  or  destroyed  by  the  folly  or  de- 
merits of  its  owner'^  ....  The  absolute  rights  of  every 
Englishman  ....  are  coeval  With  our  form  of  govern- 
ment.^ ....  These  may  be  reduced  to  three  principal  or 
primary  articles;  the  right  of  personal  security,  the  right  of  per- 
sonal liberty,  and  the  right  of  private  property The 

right  of  personal  security  consists  in  a  person's  legal  and  uninter- 
rupted enjoyment  of  his  life,  his  limbs,  his  body,  his  health,  and 
his  reputation.^  ....  This  personal  liberty  consists  in  the 
power  of  locomotion,  of  changing  situation,  of  moving  one's  person 
to  whatsoever  place  one's  own  inclination  may  direct,  without  im- 
prisonment or  restraint,  unless  by  due  course  of  law.'*     .... 

1 1  Blackstone  126.         "^  Ibid.,12'].  ^  Ibid.,  i2g.  *  Ibid.,  134. 

220 


EQUALITY  BEFORE  THE  LAW  221 

The  third  absolute  right,  inherent  in  every  Englishman,  is  that  of 
property:  which  consists  in  the  free  use,  enjoyment,  and  disposal 
of  all  his  acquisitions,  without  any  control  or  diminution,  save  only 
by  the  law  of  the  land.^ 

Though  these  rights  and  liberties — emphatically,  even 
boastfully,  acclaimed  by  Sir  William  Blackstone — were 
being  enjoyed  by  Englishmen  of  Great  Britain,  they  ex- 
isted only  In  theory  for  Englishmen  of  the  American  Col- 
onies. Repeated  efforts  to  induce  the  government  of  the 
mother  country  to  recognize  these  rights  having  failed, 
the  colonists  resolved  to  throw  off  that  government  and 
to  establish  a  new  one  whereby  an  equality  before  the  law 
would  be  secured. 

In  proclaiming  this  resolution  to  the  world  they  began 
their  justification  with  the  sweeping  premise  that  "all  men 
are  created  equal."  They  did  not  profess  to  be  announc- 
ing a  novel  philosophy;  It  was  of  such  ancient  origin  that 
they  accepted  It  as  a  self-evident  truth.  It  was  a  con- 
ception taken  from  the  Law  of  Nature,  a  theory  having 
its  beginning  In  classical  antiquity.  The  philosophers  of 
ancient  Greece  conceived  the  idea  that  reason  Is  the  guid- 
ing principle  of  the  universe,  that  the  rules  revealed  by 
natural  reason  are  the  Ideal  toward  which  men  should 
direct  their  acts,  that  the  expression  of  these  rules  Is  the 
law  of  Nature. 

The  law  of  Nature,  developed  as  a  theory  by  Greek 
philosophers,  was  applied  in  practice  by  Roman  jurists.  It 
gradually  made  Roman  law  more  equitable  and  better 
suited  to  practical  needs.    The  ideas  that  the  law  of  Na- 

^  Ibid.,  137. 


222  THIS  ECONOMIC  WORLD 

ture  is  the  source  of  morality  and  the  ideal  of  positive  law, 
that  mankind  forms  one  natural  community,  that  all  men 
are  equal  before  Nature,  gradually  pervaded  the  Roman 
mind.^  These  ideas  represented,  however,  an  Ideal  to- 
ward which  society  was  moving  rather  than  an  actual  basis 
on  which  it  was  built.  Though  Roman  jurists  employed 
the  law  of  Nature  to  render  their  positive  law  more  bene- 
ficial and  equitable,  they  halted  this  tendency  within  prac- 
tical limits.  They  frequently  used  the  term  "reason"  as 
equivalent  to  common  sense  and  convenience,  a  concep- 
tion that  approximates  "utility"  as  the  basis  of  law.^ 

With  the  rising  power  of  the  Christian  church,  the  law 
of  Nature  acquired  an  added  significance;  It  was  Identified 
with  the  law  of  God.  During  the  Middle  Ages,  however, 
the  theory  of  natural  law  enjoyed  less  practical  applica- 
tion than  among  the  ancient  Romans.  It  was  used  less  In 
the  sphere  of  pure  law  than  in  theology  and  ethics,  In  specu- 
lation and  political  controversy.^  Though  the  Christian 
church  taught  the  equality  of  men  before  God,  Its  Influ- 
ence, along  with  that  of  the  feudal  lords,  arrested  the  de- 
velopment of  individual  liberty  in  medieval  times,  except 
among  the  privileged  classes.*  Feudalism  continued  In 
France  until  the  Revolution  of  1789,  but  It  began  to  de- 
cline in  England  during  the  Middle  Ages.  The  privileged 
classes  employed  the  aid  of  the  lower  classes  in  restricting 
the  power  of  the  king,  and,  as  a  result,  increasing  liberty 

^  Bryce,  History  and  Jurisprudence,  p.  578. 

2  Ibid.,  p.  587. 

^Ibid.,  p.   595. 

■*  Scherger,  Evolution  of  Modern  Liberty,  p.  34. 


EQUALITY  BEFORE  THE  LAW  223 

was  extended  to  the  lower  classes.  In  1215,  Magna  Carta 
guaranteed  liberties  not  only  to  the  barons  but  to  all 
"freemen." 

The  religious  Reformation  of  the  sixteenth  century  be- 
gan as  a  demand  for  freedom  of  conscience,  but  it  led  to 
a  demand  also  for  freedom  in  politics  and  law.  In  the 
agitation  which  followed,  the  law  of  Nature  acquired  a 
new  meaning;  it  was  associated  with  the  conception  of  a 
"state"  of  Nature.  This  change  was  momentous.  The 
law  of  Nature  had  hitherto  been  only  an  ideal  toward 
which  positive  law  should  be  guided,  a  perfection  gradu- 
ally revealing  itself  in  the  education  of  the  human  race. 
The  "state"  of  Nature  was  now  alleged  to  have  been  a 
pre-political  age  in  which  conditions  had  been  perfect,  a 
perfection  which  civilization  had  corrupted;  since  the  law 
of  Nature  had  actually  prevailed  in  that  perfect  "state," 
it  could  and  should  be  restored. 

Among  the  brilliant  exponents  of  the  new  theory  were 
John  Milton,  Algernon  Sidney,  James  Harrington,  and 
John  Locke.  All  of  them  declared  for  individual  liberty 
and  the  natural  equality  of  men;  all  of  them  were  dili- 
gently studied  in  the  American  colonies.  Most  prominent 
among  these  as  an  influence  on  American  thought  was 
John  Locke.  Lie  argued  that  natural  law  issues  from 
reason,  that  it  is  prior  to  all  governments,  that  it  entitles 
men  to  vindicate  their  natural  rights  against  tyranny.^ 
The  framers  of  the  American  Declaration  of  Independ- 
ence invoked  the  philosophy  of  John  Locke  to  declare  as 

*  Locke,  Two  Treatises  on  Civil  Government ;  Bryce,  History  and  Juris- 
prudence, p.  598. 


224  THIS  ECONOMIC  WORLD 

a  self-evident  truth  that  "all  men  are  created  equal." 
Though  the  law  of  nature  as  a  constructive  theory  had 
developed,  or  degenerated,  into  a  destructive  political 
force — later  demonstrated  by  the  excesses  of  the  French 
Revolution — the  founders  of  the  American  government, 
like  the  great  jurists  of  ancient  Rome,  restrained  them- 
selves by  practical  common  sense.  They  knew  that  a 
"state  of  Nature"  could  be  nothing  but  savagery,  that 
"history  is  the  laboratory  of  politics,"^  that  the  remedy 
for  existing  evils  lies  in  profiting  by  the  experience  of  the 
past.  In  their  Declaration  of  Independence  they  em- 
ployed a  sweeping  phrase  from  the  idealistic  philosophy 
of  the  law  of  Nature:  "all  men  are  created  equal."  As 
they  were  drafting  a  declaration  of  war,  they  did  not 
pause  to  specify  in  what  respect  all  men  are  created  equal. 
They  trusted  the  common  sense  of  mankind  to  give  the 
words  a  practical  interpretation.  They  knew  that  all  men 
are  not  created  equal,  for  example,  in  physical,  mental, 
and  moral  strength.  Even  John  Locke  did  not  Include 
all  sorts  of  equality,^  though  he  believed  in  a  "state  of 
Nature"  as  well  as  in  the  equality  of  men. 

As  soon  as  the  founders  of  our  government  had  estab- 
lished their  independence,  they  furnished  an  abundance  of 
evidence  that  their  conception  of  equality  was  equality  be- 
fore the  law.  Every  provision  of  the  new  state  and  Fed- 
eral constitutions  was  drafted  to  make  that  ideal  a  practi- 
cal reality.  These  provisions  were  carefully  selected  from 
the  experience  of  history  as  far  as  available  and  appro- 

^  Richie,   Natural  Rights,  p.   103. 

-Locke,  T1V0  Treatises  on  Civil  Government  (Morley's  edition)  p.  217. 


EQUALITY  BEFORE  THE  LAW  225 

priate.  As  a  result,  the  founders  of  our  government  pre- 
cluded tyranny,  whether  of  one  man,  a  group,  or  a  multi- 
tude; they  secured  a  reign  of  law  and  not  a  Reign  of 
Terror;  they  instituted  a  government  that  has  endured 
for  nearly  a  century  and  a  half,  under  which  all  men  are 
equal  before  the  law. 

Though  the  new  Constitution  of  the  United  States  did 
not  employ  the  phrase  "equality  before  the  law,"  it  was 
the  most  comprehensive  safeguard  for  equality  before  the 
law  that  the  world  had  yet  seen.  The  people,  however, 
were  not  entirely  satisfied;  the  instrument  did  not  contain 
a  bill  of  rights.  They  were  determined  that  their  recent 
sad  experience  should  not  be  repeated.  Though  the  "un- 
written" constitution  of  their  former  government  was  sup- 
posed to  secure  a  reasonable  degree  of  individual  liberty,  a 
ruler  who  had  inherited  his  ideas  from  a  German  despot- 
ism had  invaded  their  rights.  As  a  further  guaranty  that 
the  new  Federal  government  should  not  do  the  same,  they 
immediately  annexed  a  bill  of  rights  to  the  new  Constitu- 
tion in  the  form  of  amendments,  thus  placing  such  rights 
as  freedom  of  speech,  freedom  of  the  press,  freedom  of 
religion,  security  of  property,  personal  liberty,  and  trial 
by  jury  beyond  the  reach  of  the  Federal  government. 
They  provided  that  no  person  should  "be  deprived  of  life, 
liberty,  or  property  without  due  process  of  law."  Even 
then  they  did  not  employ  the  phrase  "equality  before  the 
law."  With  their  new  machinery  for  making  constitu- 
tional provisions  effective — a  coordinate  judicial  power — 
they  were  satisfied  with  a  phrase  that  had  been  sanctioned 
by  the  experience  of  ages,  "due  process  of  law." 


226  THIS  ECONOMIC  WORLD 

The  phrase  "due  process  of  law"  has  its  origin  in 
Magna  Carta,  wrested  from  King  John  by  the  English 
people  at  the  remote  date  of  12 15.  In  that  historic  docu- 
ment the  crown  was  forced  to  guarantee  that  '*no  free- 
man shall  be  taken  or  imprisoned  or  disseised  or  exiled  or 
in  any  way  destroyed,  nor  will  we  go  upon  him,  except  by 
the  lawful  judgment  of  his  peers  or  by  the  law  of  the 
land."^  The  phrase  "law  of  the  land"  has  long  been 
rendered  "due  process  of  law";  the  expressions  are  used 
interchangeably  in  constitutional  law  and  are  identical  in 
meaning.^ 

Though  the  American  concept  of  "due  process  of  law" 
was  taken  from  Enghsh  traditions,  it  immediately  re- 
ceived a  wider  application.  In  England  it  limits  the  execu- 
tive power  only;  in  the  United  States  it  applies  to  the 
judicial  and  legislative  powers  as  well.^  The  innovation 
is  warranted.  Law  is  something  more  than  a  legislative 
act,  something  more  than  mere  will  exerted  as  a  result  of 
power.  It  must  not  be  a  special  rule  for  a  particular  per- 
son or  a  particular  case,  but  the  general  law  whereby 
every  citizen  shall  hold  his  life,  liberty,  property,  and  im- 
munities under  the  protection  of  the  general  rules  which 
govern  society.  Arbitrary  power,  enforcing  its  edicts  to 
the  injury  of  the  persons  and  property  of  its  subjects,  is  not 
the  law,  whether  manifested  as  the  decree  of  a  personal 
monarch  or  of  an  impersonal  multitude.* 


^  Magna  Carta,  chap.  39. 

^11  Coke's  Institutes,  p.  46;  I  Cooley's  Blackstone,  p.  134  note. 
^Murray's  Lessee  v.  Hoboken  Land  Co.,  18  How.  272,  376. 
*  Hurtado  v.  Calif ornia,  110  U.S.  516,  535,  S36. 


EQUALITY  BEFORE  THE  LAW  227 

Though  the  bills  of  rights  in  the  constitutions  of  the 
several  states^  as  well  as  the  Fifth  Amendment  to  the 
Federal  Constitution  had  provided  that  life,  liberty,  and 
property  should  be  regulated  only  by  due  process  of  law, 
events  culminating  in  the  Civil  War  convinced  the  people 
that  they  needed  an  additional  safeguard  against  the  arbi- 
trary acts  of  state  governments.  They  stipulated  in  the 
Fourteenth  Amendment  to  the  Federal  Constitution  that 
no  "State"  should  "deprive  any  person  of  life,  liberty,  or 
property,  without  due  process  of  law,  nor  deny  to  any 
person  within  its  jurisdiction  the  equal  protection  of  the 
laws."  The  immediate  object  of  this  amendment  was  to 
secure  for  the  newly  created  citizens  of  African  blood  an 
equality  before  the  law,  but  its  scope  is  infinitely  wider; 
instead  of  the  term  "citizen,"  it  employs  the  more  in- 
clusive term  "person,"  thus  embracing  aliens  as  well  as 
citizens,  people  of  every  race  and  color,  "corporate"  as 
well  as  "natural"  persons.  It  rests  the  final  decision  with 
an  impartial  tribunal  beyond  the  influence  of  local  preju- 
dice and  pressure;  it  supplies  an  additional  guaranty  that 
civil  and  political  rights  are  to  be  regulated  only  by  due 
process  of  law;  it  adds  the  further  security  of  an  equal 
protection  of  the  laws.  Just  as  due  process  of  law  is  an 
English  creation,  the  closely  related  principle,  the  equal 
protection  of  the  laws,  is  an  American  creation^ — a  more 
complete  expression  of  equality  before  the  law. 

Though  each  person  has  the  right  to  exercise  his  liberty 
and  use  his  property  according  to  his  own  views  of  his  in- 

^  McGehee,  Due  Process  of  Laiv,  p.  23. 
2  Taylor,  Due  Process  of  Laiv,  xv. 


228  THIS  ECONOMIC  WORLD 

terest  and  happiness,  according  to  the  dictates  of  his  own 
conscience,  he  is  restrained  as  well  as  protected  by  just  and 
impartial  laws.  Even  liberty,  the  greatest  of  all  rights,  is 
not  an  unrestricted  license  to  act  according  to  one's  own 
will.  It  is  only  freedom  from  restraint  under  conditions 
essential  to  the  equal  enjoyment  of  the  same  right  by 
others.^  The  Constitution  does  not  guarantee  that  no 
state  shall  deprive  any  person  of  liberty;  it  guarantees 
that  no  state  shall  deprive  any  person  of  liberty  without 
due  process  of  law.  The  liberty  which  each  person  is  per- 
mitted to  enjoy  is  liberty  regulated  by  law;^  it  is  liberty 
under  the  law.  Equality  before  the  law  presupposes  a  law 
to  be  equal  before,  a  law  whose  function  It  is  to  secure 
this  equality.  This  law  cannot  permit  any  person  to  be 
the  final  judge  of  his  rights;  otherwise,  the  more  aggres- 
sive persons  will  encroach  on  the  rights  of  others  and 
there  will  be  no  equality. 

Not  only  the  phrase  "equality  before  the  law,"  but 
even  the  more  technical  ones,  "due  process  of  law"  and 
"equal  protection  of  the  laws,"  are  merely  handy  labels 
for  broad,  general  principles.  In  practical  application 
these  principles  need  definition.  The  courts  have  never 
attempted  comprehensive  definitions.  Such  definitions 
would  be  impossible  to  formulate,  and  if  formulated 
would  at  once  prove  inadequate.  The  courts  have  at- 
tempted only  to  ascertain  as  cases  arise  what  is  and  what 
is  not  due  process  of  law^  and  equal  protection  of  the 

^  Croivley  v.  Chrlstensen,  137  U.S.  86,  89. 

^  Idem,  90. 

^  Tiuining  v.  Neiu  Jersey,  211  U.S.  78,  100. 


EQUALITY  BEFORE  THE  LAW  229 

laws — a  gradual  process  of  judicial  inclusion  and  exclu- 
sion.^ 

Due  process  of  law  precludes  capricious  decisions;  de- 
cisions must  be  made  with  proper  regard  for  precedent. 
That  is  due  process  which  is  in  substantial  accord  with  the 
law  and  usages  in  England  before  the  Declaration  of  In- 
dependence and  in  this  country  after  it  became  a  nation.^ 
Since  a  rigid  adherence  to  precedent,  however,  as  the  only 
essential  of  due  process  would  deny  every  quality  of  the 
law  but  its  age  and  render  it  incapable  of  progress,^  even 
our  fundamental  law  must  adapt  itself  to  new  conditions 
of  society.^  From  the  day  Magna  Carta  was  signed, 
amendments  to  the  structure  of  the  law  have  been  made 
with  increasing  frequency.^  Subject  to  the  limitation  that 
new  procedure  must  not  operate  as  a  denial  of  fundamen- 
tal rights,  the  state  and  Federal  governments  may  avail 
themselves  of  the  wisdom  gathered  by  experience  to  make 
necessary  change.®  Methods  of  procedure  which  at  the 
time  the  Constitution  was  adopted  were  deemed  essential 
to  the  protection  and  liberty  of  the  people  are  no  longer 
necessary;  former  restrictions  have  proved  detrimental; 
and  some  classes  of  persons,  for  example,  those  engaged 
in  dangerous  employments,  have  been  found  to  need  addi- 
tional protection."^     No  change,  however,  in  ancient  pro- 

^  Davidson  v.  Neijj  Orleans,  96  U.S.  97,  104. 

-  Lo^-e  V.  Kansas,  163   U.S.  81,  85. 

^  Hurtado  v.  California,  no  U.S.  516,  529. 

^Holden  V.  Hardy,  169  U.S.  366,  387. 

^Idem. 

^  BrO'Zcn  v.  New  Jersey,  175  U.S.  172,   175. 

"^  H olden  v.  Hardy,  169  U.S.  366,  385,  386. 


230  THIS  ECONOMIC  WORLD 

cedure  may  be  made  which  disregards  those  fundamental 
principles,  to  be  ascertained  from  time  to  time  by  judicial 
action,  which  have  relation  to  process  of  law  and  protect 
the  citizen  in  his  private  right  and  guard  him  against  ar- 
bitrary action  of  government.^ 

When  a  new  case  comes  to  a  court  for  decision  its  facts 
probably  differ,  more  or  less,  from  those  of  the  decisions 
available  as  precedents.  The  application  of  these  prece- 
dents requires,  therefore,  the  use  of  judgment  and  com- 
mon sense — the  rule  of  reason. 

There  are  no  comprehensive  definitions  of  the  phrases 
"due  process  of  law"  and  "equal  protection  of  the  laws"; 
none  can  be  formulated.  Though  quasi-definitions  are 
possible,  a  statement  of  them  would  Involve  a  digest  of  all 
the  decisions  relating  to  these  principles,  extending  back 
to  Magna  Carta.  In  the  following  paragraphs  are  ref- 
erences to  a  few  of  these  thousands  upon  thousands  of  de- 
cisions. The  result  Is  necessarily  a  sketchy  exposition 
which  can  no  more  than  illustrate  here  and  there  what  is 
and  what  Is  not  due  process  of  law  and  equal  protection 
of  the  laws. 

The  requisites  of  due  process  of  law  depend  upon  the 
subject  matter  and  the  nature  of  the  proceeding.^  Due 
process  Is  not  necessarily  judicial  process.^  Other  process 
Is  sometimes  sanctioned,  as  In  the  collection  of  taxes,  the 
acquisition  of  property  by  eminent  domain,  and  the  assess- 

^  Tiuining  v.  Neiu  Jersey,  211   U.S.   78,   loi. 
2  Ex  parte  Wall,  107  U.S.  265,  289. 
^Reetz  V.  Michigan,  188  U.S.  505,  507. 


EQUALITY  BEFORE  THE  LAW  231 

ment  for  local  improvements.^  The  problem  Involves  a 
classification  of  the  subject  matter,  a  selection  of  the  ap- 
propriate standard  of  due  process,  and  the  application  of 
that  standard.^  In  any  case,  if  the  procedure  is  found  to 
be  arbitrary  and  oppressive,  it  is  not  due  process  of  law 
and  may  be  declared  void. 

The  leading  essentials  of  due  process  are  general  and 
equal  laws,  notice  and  hearing,  and  jurisdiction.^  Since 
due  process  requires  that  the  laws  operate  on  all  alike,* 
equality  before  the  law  was  a  fundamental  principle  of 
our  constitution  even  before  the  addition  of  the  equal- 
protection  clause  of  the  Fourteenth  Amendment.  Gen- 
erality and  equality  of  the  laws  as  necessary  to  due  proc- 
ess is  an  American  innovation.^  The  requirements  for 
notice  and  hearing  regard  substance  rather  than  form  and 
depend  on  the  nature  of  the  case.^  The  notice  must  be 
reasonable  in  time.*^  One  kind  of  notice  is  required  before 
courts,  another  before  administrative  officials,  another  in 
the  collection  of  taxes,  and  another  in  proceedings  for 
public  improvements.^  In  cases  of  direct  contempt  com- 
mitted in  the  presence  of  a  court,  neither  notice  nor  trial 
is  essential  to  due  process.®     The  power  of  a  court  to 

^  Davidson  v.  Neiu  Orlearis,  96  U.S.  97,  107. 
^  Taylor,  Due  Process  of  Law,  286. 
^  McGehee,  Due  Process  of  Lain,  60. 
*  Giozza  V.  Turman,  148  U.S.  657,  662. 
^  Taylor,  Due  Process  of  Lanv,  297. 
'^Davidson  v.  New  Orleans,  96  U.S.  97,  105. 
''Roller  V.  Holly,  176  U.S.  398. 
^Taylor,  Due  Process  of  Law,  286. 
^Ex  parte  Terry,  128  U.S.  289. 


232  THIS  ECONOMIC  WORLD 

make  an  order  carries  with  it  the  power  to  punish  for  dis- 
obedience of  that  order.  To  submit  the  question  of  dis- 
obedience to  another  tribunal,  either  a  jury  or  another 
court,  would  deprive  the  proceeding  of  its  efficiency.^ 
When  the  court  has  no  personal  knowledge  of  the  con- 
tempt, however,  the  right  to  notice  and  hearing  must  be 
substantially  protected.^  A  court  may  grant  writs  of  gar- 
nishment and  attachment,  foreclose  a  mortgage,  or  en- 
force a  lien  against  property  within  its  jurisdiction,  even 
though  the  owner  is  not  within  the  jurisdiction  and  has  no 
actual  notice.  The  law  presumes  that  he  will  keep  in 
touch  with  his  property.  Due  process  requires  that  one 
have  an  opportunity  to  be  heard  in  his  own  defense^  but  it 
may  not  require  a  hearing  before  a  court  of  justice.^  In 
many  cases  a  hearing  before  an  executive  or  administra- 
tive board  has  been  held  sufficient  to  legalize  the  taking 
of  property.^  Usually  a  person  may  be  deprived  of  life 
or  liberty  only  after  a  trial  in  a  court  of  justice.^  Due 
process  in  a  criminal  case  requires  a  law  defining  the 
offense,  a  court  of  competent  jurisdiction,  accusation  in 
due  form,  notice,  opportunity  to  answer  the  charge,  trial 
according  to  the  settled  course  of  judicial  proceedings,''^ 
and  a  right  to  be  discharged  unless  found  guilty.  If  a  de- 
fendant  voluntarily  pleads   guilty,   even   though   he   be 

^Ex  parte  Terry,  128  U.S.  289. 

^  Savin,  Petitioner,  131  U.S.  267,  274  et  seq. 

^  Hovey  v.  Elliott,  167  U.S.  409. 

*  MrMillen  v.  Anderson,  95  U.S.  37,  41. 

^Hibben  v.  Smith,  191  U.S.  310. 

^ Hagar  v.  Reclamation  Dist.,  in  U.S.  701,  708. 

''Frank  v.  Mangum,  237  U.S.  309,  326. 


EQUALITY  BEFORE  THE  LAW  233 

charged  with  a  felony,  a  trial  is  no  longer  necessary,  and 
in  appropriate  cases  the  sentence  of  death  may  be  pro- 
nounced.^ A  right  of  appeal  is  not  a  requisite  of  due 
process.^  Military  law  is  due  process  for  those  in  the 
military  or  naval  service;^  martial  law  is  due  process  when 
properly  proclaimed  by  the  executive,  public  danger  war- 
ranting the  substitution  of  executive  process  for  judicial,* 

Jurisdiction  extends  generally  to  persons  and  things 
within  the  state,  and  to  neither  persons  nor  things  beyond 
the  state. ^  The  courts  of  one  state  have  no  control  over 
the  resident  of  another  state  when  neither  his  person  nor 
his  property  is  within  its  jurisdiction.^  Though  a  court 
may  control  property,  within  its  jurisdiction,  of  a  non- 
resident, It  cannot  render  a  personal  judgment  against 
him;  a  notice  served  by  publication  is  Inadequate.'^  To 
afford  jurisdiction,  courts^  and  administrative  officials  must 
also  be  competent  by  the  laws  of  their  creation  to  pass 
upon  the  matter  before  them. 

The  rights  protected  by  due  process  of  law  are  life, 
liberty,  and  property.  The  terms  "life"  and  "liberty" 
are  used  In  a  broad  sense,  including  all  personal  as  dis- 
tinguished from  property  rights.  Any  law  which  destroys 
property  or  its  value,  or  takes  away  any  of  its  essential 


^  Hallinger  v.  Davis,  146  U.S.  314. 
^McKane  v.  Durston,  153  U.S.  684. 
^Reaves  v.  Ainsivorth,  219  U.S.  296. 
^  Moyer  v.  Peabody,  212  U.S.  78. 
^  Galpin  v.  Page,  18  Wall.  350,  367. 
^Riverside,  etc.,  Mills  v.  Menefee,  237  U.S.  iJ 
''  Pennoyer  v.  Neff,  95  U.S.  714. 
^Idem,  733. 


234  THIS  ECONOMIC  WORLD 

attributes,  deprives  the  owner  of  his  property.^  The  right 
to  work,^  to  pursue  a  profession,  business,  or  calling^  Is 
property.  The  labor  and  skill  of  the  workman,  the  plant 
of  the  manufacturer,  the  equipment  of  the  farmer,  the  In- 
vestments of  commerce,  are  all  property.^  A  statute  pro- 
viding that  the  right  to  labor  shall  be  construed  as  a  per- 
sonal and  not  a  property  right  and  shall  be  denied  an  In- 
junction for  its  enforcement  Is  without  due  process  of 
law.^  The  right  to  make  a  contract  Is  both  liberty^  and 
property.''  Liberty  embraces  the  right  of  a  person  to  use 
his  faculties  In  all  lawful  ways,  to  live  and  work  where  he 
will,  to  enter  Into  all  contracts  which  may  be  proper  for 
earning  his  livelihood,  and  to  earn  it  by  any  lawful  call- 
ing.^ Though  the  freedom  of  contract  Is  not  absolute,  it 
Is  the  general  rule  and  restraint  the  exception;  such  re- 
straint can  be  justified  only  by  exceptional  circumstances.^ 
Within  these  limits,  the  parties  to  a  contract  have  a  right 
to  obtain  the  best  terms  they  can  by  private  bargalnlng.^*^ 
Taking  property  from  one  person  and  giving  It  to  an- 
other is  without  due  process  of  law.^^    This  was  the  effect 


^  In  re  Jacobs,  98  N.Y.  98,  105. 

^  Bogni  v.  Perotti,  224  Mass.  152. 

'  McGehee,  Due  Process  of  Laiv,  33s  and  cases  cited. 

*  State  V.  Steivart,  59  Vt,  273. 

^  Boffni  V.  Perotti,  224  Mass.  152. 

^Lochner  v.  lieiu  York,  198  U.S.  45,  53. 

"^  German,  etc.,  Co.  v.  Barnes,  189  Fed.  769,  775. 

^  Young's  Case,  loi  Va.  853,  863. 

^  Adk'tns  V.  Children's  Hospital,  261  U.S.  525,  546. 

^Udem,  545- 

"^^  Hurtado  v.  California,  no  U.S.  516,  536. 


EQUALITY  BEFORE  THE  LAW  235 

of  an  order  of  a  state  railroad  commission  which  required 
a  railroad  to  install  and  maintain  cattle  scales,  since  the 
purpose  of  the  requirement  was  to  facilitate  trading  In 
cattle  and  had  no  substantial  relation  to  their  transporta- 
tion.^ A  legislature  cannot  compel  a  railroad  company 
to  furnish  free  transportation  to  persons  having  nothing 
to  do  with  its  affairs,  such  as  members  of  a  state  water 
supply  commission,^  nor  impose  on  the  owner  of  a  motor 
vehicle  liability  for  injuries  resulting  from  the  negligent 
operation  of  the  car  by  a  person  who  obtains  possession 
without  his  consent  and  without  his  f  ault.^ 

Due  process  requires  that  laws  regulating  conduct 
should  fix  standards  possible  to  ascertain.*  In  order  to 
authorize  combinations  of  tobacco  growers,  Kentucky 
laws  modified  former  restrictions  and  permitted  combina- 
tions for  controlling  prices,  unless  a  price  was  fixed  that 
was  greater  or  less  than  the  real  value  of  the  article.  This 
real  value  was  defined  to  be  "its  market  value  under  fair 
competition  and  under  normal  market  conditions."  Since 
a  combination  of  manufacturers  was  thus  required  to 
guess  on  peril  of  indictment  what  Its  products  would  have 
sold  for  if  the  combination  had  not  existed,  the  laws  were 
unconstitutional;  they  Imposed  a  standard  that  could  not 
reasonably  be  ascertained.^ 

No  vested  right  exists  In  a  mode  of  procedure.  A 
remedy  as  such  is  no  part  of  a  contract  and  may  be 

1  Great  Northern  R.  Co.  v.  CaJiill,  253  U.S.  71. 

-Delaivare,  etc.,  R.  Co.  v.  Board  of  Pub.  Utilities,  85  N.J.L.  28. 

^Dougherty  v.  Thomas,  174  Mich.  371. 

^International  Harvester  Co.  v.  Kentucky,  234  U.S.  216. 

=  Idem. 


236  THIS  ECONOMIC  WORLD 

changed  at  the  will  of  the  legislature,  provided  that  the 
change  does  not  take  away  the  right  to  enforce  the  con- 
tract.^ Statutes  limiting  the  periods  within  which  suits  are 
to  be  brought  may  be  changed,  when  a  reasonable  time  is 
allowed  for  the  commencement  of  actions.  If  the  legisla- 
ture may  Impose  a  limitation  where  none  existed  before, 
it  may  change  one  which  has  already  been  established; 
the  parties  to  a  contract  have  no  more  vested  right  In  a 
particular  limitation  which  has  been  established  than  they 
have  in  an  unrestricted  right  to  sue.^  Also,  due  process 
does  not  require  any  particular  form  of  criminal  proce- 
dure as  long  as  the  defendant  has  sufficient  notice  of  the 
accusation  and  an  adequate  opportunity  to  defend  him- 
self.^ Any  legal  proceeding  enforced  by  public  author- 
ity In  furtherance  of  the  public  welfare  and  with  proper 
regard  for  liberty  and  justice,  whether  sanctioned  by 
custom  or  newly  devised  In  the  discretion  of  the  legis- 
lative power,  Is  due  process  of  law.^  Due  process  does 
not  require  Indictment  by  a  grand  jury.^  A  state  may  re- 
duce the  number  of  petit  jurors  from  twelve  to  eight, ^  or 
dispense  with  a  jury  trial  altogether. '''  In  cases  of  felony, 
due  process  requires  that  the  defendant  be  present  at 
every  stage  of  his  trial.  If  he  Is  in  custody  or  If  he  is 
charged  with  a  capital  offense,  he  is  Incapable  of  waiving 


^  McGehee,  Due  Process  of  Laiv,  174. 

^  Terry  v.  Anderson,  95  U.S.  628,  633. 

^Rogers  v.  Peck,  199  U.S.  425. 

^  Hurtado  v.  California,  no  U.S.  516,  537. 

^Idem,  516. 

^Maxivell  v.  Doiv,  176  U.S.  581. 

''Jordan  v.  Massachusetts,  225  U.S.  167,  176. 


EQUALITY  BEFORE  THE  LAW  237 

this  right. ^     He  may,  however,  waive  the  right  to  be 
present  when  the  verdict  is  rendered.^ 

Though  equality  in  right,  in  protection,  and  In  burden 
has  been  exempHfied  in  the  life  of  this  nation  and  in  its 
constitutional  enactments  since  the  Declaration  of  Inde- 
pendence,^ the  equal-protection  clause  of  the  Fourteenth 
Amendm.ent  has  amplified  this  equality  and  has  safe- 
guarded it  with  the  power  of  the  Federal  government. 
"Equal  protection  of  the  laws"  is  more  inclusive  than 
"due  process."*  Due  process  secures  equality  by  fixing  a 
required  minimum  of  protection  for  the  life,  liberty,  and 
property  of  everyone,  upon  which  the  Congress  or  the  leg- 
islature may  not  encroach.  The  additional  guaranty  of 
equal  protection  is  aimed  at  individual  or  class  privilege, 
at  hostile  discrimination;  it  seeks  an  equality  of  treatment 
for  all  persons,  even  though  they  enjoy  the  protection  of 
due  process.^  The  equal  protection  of  the  laws  is  a 
pledge  of  the  protection  of  equal  laws.^  Equal  protection 
necessarily  involves  equal  regulation  and  equal  burdens. 
The  exercise  of  liberty  by  each  person  must  be  restrained 
so  as  not  to  impair  an  equal  enjoyment  of  liberty  by 
others;  the  use  of  property  by  each  person  must  be  regu- 
lated so  as  not  to  interfere  with  an  equal  use  of  property 
by  others,  nor  to  injure  the  rights  of  the  community.'^ 

1  Diaz  V.  United  States,  223  U.S.  442,  455. 

^  Frank  v.  Mangum,  237  U.S.  309. 

3  Gulf,  etc.,  R.  Co.  V.  Ellis,  165  U.S.  150. 

*  United  States  v.  Neiv  York,  etc.,  R.  Co.,  165  Fed.  742. 

°  Truax  v.  Corrigan,  257  U.S.  312,  332,  333. 

^  Yick  Wo  V,  Hopkins,  118  U.S.  356,  369. 

'^  Common'u.'ealth  v.  Alger,  7  Cush.  53,  84. 


238  THIS  ECONOMIC  WORLD 

The  Fourteenth  Amendment  applies  to  the  arbitrary 
acts  of  states  and  not  of  their  citizens  or  residents.^  Laws 
of  a  state  may  now  be  reviewed  by  the  Federal  courts; 
they  will  not  be  sustained  when  they  are  special,  partial, 
or  arbitrary.^  The  Fourteenth  Amendent  limits  all  the 
departments  and  agencies  of  a  state  government,  not  only 
the  executive,  legislative,  and  judicial  departments,  but  also 
the  subordinate  legislative  bodies  of  counties  and  cities.* 
The  unconstitutionality  of  legislation  may  be  manifested 
on  its  face  or  in  the  manner  of  Its  enforcement.  The  state 
in  the  management  of  its  property,  however,  Is  not  per- 
forming a  government  function  and  Is  not  limited  by  the 
Fourteenth  Amendment.  Having  the  right  of  other  em- 
ployers to  determine  the  character  of  its  employees,  it 
may  discriminate  In  favor  of  its  citizens  and  may  exclude 
aliens  from  employment  on  its  public  work.  Equal  pro- 
tection does  not  mean  that  nonresidents  and  aliens  who 
have  no  interest  in  the  common  property  of  the  state  must 
share  In  that  property.*  If  the  discriminatory  statute 
Includes  not  only  public  work  but  also  private  enterprise, 
it  is  unconstitutional.^ 

The  equal-protection  clause  secures  equality  before  the 
law  in  that  it  guarantees  equal  recourse  to  the  law  by  all 
persons  for  the  vindication  of  rights  and  the  redress  of 
wrongs.^    A  statute  which  subjects  persons  to  such  exces- 

^  Chil  Rights  Cases,  109  U.S.  3. 

-  Hurtado  v.  California,  no  U.S.  516,  536. 

^Raymond  V.  Chicago  Traction  Co.,  207  U.S.  20,  36. 

^Heim  v.  McCall,  239  U.S.  175. 

°  Truax  v.  Raich,  239  U.S.  33. 

^  Bogni  v.  Perotti,  224  Mass.  152,   157. 


EQUALITY  BEFORE  THE  LAW  239 

sive  penalties  for  its  violation  as  to  intimidate  them  from 
testing  its  validity  in  court/  or  one  which  provides  that 
the  right  to  labor  shall  not  be  recognized  as  property  by 
an  equity  court,^  or  one  which  exempts  ex-employees, 
when  committing  irreparable  injury  to  the  business  of  their 
former  employer,  from  restraint  by  Injunction  while  leav- 
ing all  other  persons  engaged  In  like  wrong-doing  subject 
to  such  restraint,^  is  a  denial  of  equal  protection.  A  per- 
son who  suffers  no  legal  injury  from  a  statute,  however, 
cannot  contest  its  constitutionality  because  it  discriminates 
against  others.* 

Though  "equal  protection  of  the  laws"  and  **due  proc- 
ess" are  not  identical  In  scope,®  they  are  similar  in  some 
respects.  Both  apply  to  "persons"  and  not  merely  to 
"citizens."  The  term  "person"  is  not  confined  to  citi- 
zens;^ it  Includes  nonresidents,''  aliens,^  Chinese  or  Mon- 
golians,^ and  all  persons  Irrespective  of  race,  color,  or  na- 
tionality.^^ A  state  cannot  prefer  resident  creditors  over 
nonresident  creditors. ^^  Though  the  Congress  may  law- 
fully exclude  aliens  or  regulate  their  admission,  an  alien 


^  JVadley,  etc.,  R.  Co.  v.  Georgia,  235  U.S.  651. 

-  Bogni  v.  Perottl,  224  Mass.  152. 

^Truax  v.  Corrigan,  257  U.S.  312,  336,  337. 

*  Dillingham  v.  McLaughlin,  264  U.S.  370,  374. 

^  Truax  v.  Corrigan,  257  U.S.  312,  332. 

^  Frazer  v.  McConivay,  etc.,  Co.,  82  Fed.  257. 

''Drew  V.  Cass,  129  App.  Div.  453. 

^Yick  JVo  V.  Hopkins,  118  U.S.  356,  369. 

^  In  re  Parrott,  1  Fed.  481. 

'^^Yick  JVo  V.  Hopkins,  118  U.S.  356,  369. 

^^  Sully  V.  Am.  Nat'l  Bank,  178  U.S.  289. 


240  THIS  ECONOMIC  WORLD 

who  Is  rightfully  within  the  country  Is  entitled  to  due  proc- 
ess of  law.^  A  corporation  Is  a  person  within  the  mean- 
ing of  the  Fifth  and  Fourteenth  Amendments.^  Though 
a  corporation  Is  a  person  as  regards  its  property  rights,^ 
the  "liberty"  protected  by  these  amendments  is  the  liberty 
of  natural  and  not  of  artificial  persons.* 

The  rights  of  life,  liberty,  and  property  are  subject  to 
certain  paramount  sovereign  powers  of  the  state,  such  as 
the  police  power,  eminent  domain,  and  taxation.^  The 
police  power  Is  the  power  inherent  In  a  state  government 
to  preserve  the  order,  peace,  health,  and  safety  of  the 
public,  and  to  provide  for  its  general  welfare.^  Speaking 
generally,  this  power  Is  reserved  to  the  states;  the  Con- 
stitution did  not  grant  It  to  the  Federal  government."^ 
The  legislature  cannot  deprive  Itself  of  the  power  of  mak- 
ing these  needful  regulations,  the  police  power  being  in- 
alienable even  by  express  grant.^  The  due-process  guar- 
anty is  not  Intended  to  limit  the  subjects  on  which  the 
police  power  of  the  state  may  lawfully  be  exerted.^  Lib- 
erty secured  by  the  Constitution  Is  not  an  unrestricted 
license  to  act  according  to  one's  own  will.    It  Is  only  free- 

^Lem  Moon  Sing  v.  United  States,  158  U.S.  538,  547. 

2  Covington,  etc.,  Co.  v.  Sandford,  164  U.S.  578,  592, 

^ Smyth  V.  Ames,  169  U.S.  466. 

*  Northivestern,  etc.,  Co.  v.  Riggs,  203  U.S.  243,  255. 

^  Taylor,  Due  Process  of  Laiv,  493. 

^  Manigault  v.  Springs,  199  U.S.  473,  480. 

''Keller  v.  United  States,  213  U.S.  138,  144. 

8  Chicago,  etc.,  R.  Co.  v.  Tranbarger,  238  U.S.  67,  77. 

^  Idem,   76,    77, 


EQUALITY  BEFORE  THE  LAW  241 

dom  from  restraint  upon  conditions  essential  to  the  en- 
joyment of  the  same  right  by  others,  and  is  subject  to 
regulation  by  the  state  in  the  exercise  of  its  police  power.^ 
Such  regulation  may  be  enforced  upon  all  without  regard 
to  their  own  private  views — that  is,  the  private  views  of 
the  minority — as  to  the  wisdom  of  the  measures  adopted.^ 
Prior  to  the  adoption  of  the  United  States  Constitution, 
police  power  was  sparingly  used  in  this  country.  As  we 
were  almost  entirely  an  agricultural  people,  the  need  for 
special  protection  of  a  particular  class  did  not  exist.^  The 
exercise  of  this  power  has  been  greatly  expanded  during 
the  past  century  because  of  the  enormous  increase  in  the 
number  of  occupations  which  are  dangerous.*  The  growth 
of  cities,  the  development  of  mining  and  manufacturing, 
have  required  increased  regulation — fire  escapes  for  large 
buildings,  inspection  of  boilers,  protection  of  passengers 
and  employees  on  railways,  guarding  of  dangerous  ma- 
chinery, stairways,  and  elevator  shafts,  the  cleanliness 
and  ventilation  of  mines  and  work  rooms. ^  The  state 
may  abate  a  public  nuisance,  destroy  buildings  that  en- 
danger the  safety  of  the  public  or  stand  in  the  path  of  a 
conflagration,  destroy  diseased  animals  and  unwholesome 
food,  prohibit  wooden  buildings  in  cities,  restrict  objec- 
tionable trades  to  certain  localities,  compel  vaccination, 
confine  persons  that  are  insane  or  afflicted  with  contagious 

^  Croivley  v.  Chr'istensen,  137  U.S.  86,  89,  90. 

^  McGehee,  Due  Process  of  Laiv,  343. 

^  Holden  V.  Hardy,  169  U.S.  366,  392,  393. 

^  Idem,  391. 

^Idem,  393. 


242  THIS  ECONOMIC  WORLD 

disease,  restrain  vagrants,  beggars,  and  drunkards,  sup- 
press obscene  publications  and  immoral  resorts.^ 

Not  only  industries  involving  special  dangers  to  em- 
ployees or  the  public,^  but  also  those  affected  with  a  pub- 
lic interest  may  be  regulated,  such  as  the  business  of  inn- 
keepers,^ wharfingers,'*  ferrymen,^  hackmen,^  millers,'^ 
warehousemen,^  grain  elevator  companies,^  stockyard 
companies, ^^  railroad  companies, ^^  companies  supplying 
water  and  gas,^^  persons  operating  public  amusements, ^^ 
or  persons  furnishing  market  quotations.^*  As  a  reason- 
able regulation  to  promote  the  safety  of  employees  and 
passengers,  railroads  may  be  required  to  equip  their  cars 
with  automatic  couplers  and  continuous  brakes  and  their 
locomotives  with  driving-wheel  brakes. ^^ 

Because  of  an  emergency,  a  business  which  is  normally 
private  may  temporarily  be  affected  with  a  public  interest. 
Regulations  which  ordinarily  would  be  unconstitutional 

^  Laivton  v.  Steele,  152  U.S.  133,  136. 

-Missouri  Pac.  R.  Co.  v.  Mackey,  127  U.S.  205,  210. 

^  Munn  V.  Illinois,  94  U.S.  113,  131. 

^  Idem, 

^  Idem. 

^ Lindsey  v.  Anniston,  16  So.   (Ala.)   454. 

"^  Munn  V.  Illinois,  94  U.S.  113,  131. 

^  Idem,  113. 

^  Brass  v.  Sioeser,  153  U.S.  391. 
1^  Coning  v.  Kansas  City,  etc.,  Co.,  183  U.S.  79,  85. 
"  Gladson  v.  Minnesota,  166  U.S.  427. 
^"^  Spring  Valley  Water  Works  v.  Schottler,  110  U.S.  347. 
^^  Greenberg  v.   Western  Turf  Ass'n,  73  Pac.   (Calif.)    lojo. 
^^Neiv  York,  etc.,  Exch.  v.  Board  of  Trade,  127  111.  153. 
^^  Johnson  v.  So.  Pac.  Co.,  196  U.S.  i. 


EQUALITY  BEFORE  THE  LAW  243 

may  then  be  due  process  of  law.^  The  shortage  of  hous- 
ing facilities  following  the  World  War  created  an  emer- 
gency which  justified  legislatures  in  fixing  rents.^  Such 
regulations,  however,  go  "to  the  verge  of  the  law,"^  and 
probably  would  not  be  upheld  as  a  permanent  change.* 

Though  the  Adamson  Law,  enacted  during  the  World 
War,  establishing  an  eight-hour  day  and  minimum  wages 
for  railway  employees,  was  an  extreme  regulation,  the 
business  was  affected  with  a  public  interest,^  and  the  law 
was  a  temporary  expedient  to  meet  a  sudden  and  great 
emergency  in  which  the  parties  could  not  agree.®  Such 
laws  may  lose  their  validity  as  soon  as  the  emergency  is 
passed.''^  Though  no  unusual  emergency  was  involved, 
the  Industrial  Relations  Act  of  Kansas  undertook  to  com- 
pel the  employer  and  employees  in  the  manufacture  of 
food,  in  the  event  of  disagreement,  to  continue  activities 
on  terms  fixed  by  an  agency  of  the  state.  In  thus  un- 
reasonably curtailing  the  right  of  the  parties  to  contract 
about  their  own  affairs,  the  statute  was  a  denial  of  due 
process  of  law.^  This  statute  is  unconstitutional  as  ap- 
plied also  to  the  business  of  mining  coal.^ 

The  legislature  in  the  exercise  of  its  police  power  may 

^  Block  V.  Hirs/i,  256  U.S.  135,  157. 

~  Marcus  Bronjun  Holding  Co.  v.  Feldman,  256  U.S.  170. 

^Pennsylvania  Coal  Co.  v.  Mahon,  260  U.S.  393,  416. 

^  Block  V.  Hirsh,  256  U.S.  135,  157. 

^  Wilson  V.  Ne<w,  243  U.S.  332. 

^  Adkins  V.  Children's  Hospital,  261  U.S.  525,  551. 

"^  Chastleton  Corp.  v.  Sinclair,  264  U.S.  S43,  547. 

*  IVolff  Co.  V.  Industrial  Court,  262  U.S.  522. 

^  Dorchy  v.  Kansas,  264  U.S.  286. 


244  THIS  ECONOMIC  WORLD 

prescribe  qualifications  for  the  practice  of  professions  or 
occupations  requiring  special  knowledge  or  skill,  or  inti- 
mately affecting  the  public  welfare,  as  that  of  lawyer,^ 
doctor,^  engineer,^  nurse,*  or  plumber.^ 

The  state  may  legislate  to  prevent  fraud  and  to  protect 
certain  classes  of  persons  against  themselves,  though  such 
legislation  may  interfere  with  the  private  right  of 
contract.  Usury  laws  are  justified  because  the  bor- 
rower's necessity  places  him  at  the  mercy  of  the  lender. 
Payment  of  sailors  In  advance  may  be  forbidden.  By  the 
advance  of  money  for  dissipation,  conspirators  gain  con- 
trol over  sailors  and,  In  effect,  sell  them  to  vessels  ready 
to  sail.®  As  a  protection  against  fraud,  statutes  may 
specify  the  size  of  a  loaf  of  bread,'^  or  require  that  cred- 
itors be  notified  of  the  proposed  sale  In  bulk  of  a  stock  of 
goods, ^  that  compounds  be  marked  with  their  ingredi- 
ents,^ that  Ice  cream  contain  a  certain  percentage  of 
butter  fat,^*^  and  may  regulate  the  sale  of  securities. ^^ 

The  legislature  may  regulate  business  to  prevent  unfair 
methods  in  the  payment  of  wages.     It  may  require  that 

'^  In  re  O'Brien,  63  Atl.   (Conn.)   777, 

^  Reetz  V.  Michigan,  188  U.S.  505. 

^  Hyvonen  v.  Hector  Iron  Co.,  iij  N.W.   (Minn.)    167. 

*  State  V.  Yellozvstone,  etc..  Court,  146  Pac.   (Mont.)   743. 

^Douglas  v.  People,  225  111.  536. 

^Patterson  v.  Bark  Eudora,  190  U.S.  i6g,  175. 

''  Sclimidinger  v.  Chicago,  226  U.S.  578. 

^  Lemieux  v.  Young,  211   U.S.  489. 

^American,  etc.,  Co.  v.  Cru7nbine,  207  Fed.  332. 
^'^  Hutchinson,  etc.,  Co.  v.  loiLta,  242   U.S.  153. 
"  Merrick  v.  Halsey  &  Co.,  242  U.S.  568. 


EQUALITY  BEFORE  THE  LAW  245 

coal  be  measured  before  screening  for  payment  of  miners' 
wages/  that  store  orders  issued  in  payment  of  wages  be 
redeemed  in  cash;^  it  may  regulate  the  time  within  which 
wages  shall  be  paid  in  certain  industries.^  As  none  of 
these  statutes  go  to  the  extreme  of  fixing  wages,*  they  are 
not  an  unreasonable  invasion  of  the  right  of  contract. 

For  protection  of  the  public  health  the  legislature  may 
limit  the  hours  of  labor  in  certain  industries,  such  as  eight 
hours  a  day  in  mines  and  smelters,^  ten  hours  a  day  in  any 
mill  or  factory,  with  overtime  not  exceeding  three  hours 
at  extra  pay.^ 

The  state  has  the  right  to  regulate  combinations  for 
controlling  prices. '^  The  purpose  of  such  statutes  Is  to 
secure  competition.^  For  this  reason  a  company  may  be 
prohibited  from  selling  cheaper  In  one  locality  than  In 
another.^ 

As  a  part  of  the  right  to  promote  the  public  welfare 
the  state  may  consider  the  convenience^^  but  not  the 
esthetic  tastes^^  of  the  public.     The  carrying  of  placards 


^McLean  v.  Arkansas,  211  U.S.  539. 

-  Knoxville  Iron  Co.  v.  Harbinson,  183  U.S.  13. 

3  Erie  R.  Co.  v.  Williams,  233  U.S.  685. 

*  Adkins  V.  Children's  Hospital,  261  U.S.  525,  547. 

^Holden  V.  Hardy,  169  U.S.  366. 

^Bunting  v,  Oregon,  243  U.S.  426. 

''National,  etc.,  Co.  v.  Texas,  197  U.S.  115. 

^International  Harvester  Co.  v.  Missouri,  234  U.S.  199,  209. 

^  Central  Lumber  Co.  v.  South  Dakota,  226  U.S.  157. 
^•^  Chicago,  etc.,  R.  Co.  v.  Illinois,  200  U.S.  561,  592, 
^  Commonivealth  v.  Boston,  etc.,  Co.,  188  Mass.  348. 


246  THIS  ECONOMIC  WORLD 

or  signs  on  the  sidewalks^  or  the  operating  of  advertising 
trucks  or  vans  in  the  streets^  may  be  prohibited  because 
they  tend  to  cause  congestion  and  disorder,  not  because 
they  offend  esthetic  tastes.  Though  large  discretion  rests 
in  the  legislature  to  determine  what  the  interests  of  the 
public  require  and  what  measures  are  necessary  for  their 
protection,^  the  exercise  of  the  poHce  power  must  be 
reasonable;*  it  cannot  justify  oppressive  and  unjust  legis- 
lation.^ Legislative  assertion  that  a  law  relates  to  the 
public  welfare  is  not  sufficient  to  render  it  valid.  A  statute 
forbidding  the  teaching  In  schools  of  any  modern  language 
other  than  English  to  any  child  who  has  not  passed  the 
eighth  grade  Is  deprivation  of  liberty  without  due  process 
of  law.®  Though  an  employment  agency  may  be  capable 
of  abuses,  it  Is  a  useful  calling  when  properly  conducted. 
A  law  which  forbids  employment  agents  from  receiving 
fees  from  workers  for  whom  they  secure  occupation  In 
effect  destroys  the  business  and  deprives  those  who  con- 
duct It  of  liberty  and  property  without  due  process  of  law.'^ 
When  a  statute  prescribes  unreasonable  qualifications 
for  occupations,  such  as  requiring  four  years'  experience 
for  a  horseshoer,^  imposing  on  a  dentist  conditions  not 


^  Comrnonivealt/i  v.  McCajferty,  14S  Mass.  384. 
-Fifth  Ave.  Coach  Co.  v.  City  of  N.Y.,  221  U.S.  467. 
^  Laiuton  v.  Steele,  152  U.S.  133,  136. 
^Plessy  V.  Ferguson,  163  U.S.  537,  550. 
^Laioton  v.  Steele,  152  U.S.  133,  138. 
^  Meyer  v.  Nebraska,  262  U.S.  390. 
''Adams  V.  Tanner,  244  U.S.  S90. 
^  Bessette  v.  People,  193  111.  334. 


EQUALITY  BEFORE  THE  LAW  247 

germane  to  the  calling,^  and  requiring  that  a  conductor  on 
any  railroad  train  shall  have  served  for  two  years  as  a 
conductor  or  brakeman  on  a  freight  train, ^  or  when  it 
confers  arbitrary  discretion  on  a  board  to  withhold  a 
license  for  practice  of  a  profession,^  it  is  a  denial  of  due 
process  of  law. 

In  the  exercise  of  its  police  power  the  state  may  dis- 
tinguish, select,  and  classify  matters  of  legislation.  The 
classification  must  be  reasonable"*  but  it  need  not  be  logi- 
cally appropriate  or  scientifically  accurate.  As  this  prob- 
lem in  the  government  of  human  beings  is  different  from 
assigning  objects  of  the  physical  world  to  their  proper 
associates,  a  wide  discretion  is  necessary  to  make  legisla- 
tion practicable.^ 

When  regulations  are  properly  imposed  on  one  busi- 
ness, it  is  not  a  reason  for  complaint  that  other  kinds  of 
business  are  not  subject  to  like  regulation.^  A  statute 
may  prohibit  the  grazing  of  sheep  on  the  public  domain 
within  two  miles  of  a  dwelling  house,  even  though  the 
grazing  of  cattle,  horses,  and  hogs  is  not  prohibited."^  An 
ordinance  m.ay  exclude  from  the  streets  advertising  trucks 
or  vans,  even  though  it  permits  business  notices  on  or- 
dinary vehicles  when  engaged  in  the  usual  business  of  the 
owner.     The  gaudy  display  of  advertisements  is  for  the 

^Douglas  v.  Nolle,  261  U.S.  165,  168. 

-Smith  V.  Texas,  233  U.S.  630. 

^Douglas  v.  Noble,  261  U.S.  165,  168. 

*  Atchison,  etc.,  R.  Co.  v.  Voshurg,  238  U.S.  56,  59. 

^  Dist.  of  Columbia  v.  Brooke,  214  U.S.  138,  150. 

^  Soon  Hing  v.  Croivley,  113  U.S.  703. 

''Bacon  v.  Walker,  204  U.S.  311. 


248  THIS  ECONOMIC  WORLD 

purpose  of  attracting  attention  and  tends  to  produce  con- 
gestion. Limiting  the  prohibition  to  general  advertising 
for  hire  is  not  an  arbitrary  classification.^  An  ordinance 
may  prohibit  the  operation  of  billiard  or  pool  rooms  as 
such,  though  it  permits  billiard  and  pool  tables  In  hotels 
for  the  use  of  guests — the  ordinance  being  aimed  at  the 
place  and  not  the  game.-  A  classification  is  reasonable 
which  regulates  the  fire  insurance  rates  of  stock  companies 
and  exempts  those  of  farmers'  mutual  companies;^  also 
one  which  exempts  from  the  operations  of  a  usury  law 
loans  made  by  national  banks,  state  banks,  trust  com- 
panies, and  bona  fide  mortgages.'*  The  abuses  which  the 
usury  law  seeks  to  remedy  are  not  inherent  In  loans  of  this 
character.  A  statute  withholding  the  right  to  own  land 
from  aliens  who  have  not  in  good  faith  declared  their 
intentions  of  becoming  citizens  is  no  denial  of  due  process 
or  equal  protection.  The  quality  and  allegiance  of  those 
who  own  or  occupy  farm  lands  are  of  importance  to  the 
state  as  affecting  its  power  and  safety.^ 

A  corporation  may  be  required  to  file  an  affidavit  that 
it  has  not  participated  in  any  illegal  combination,  even 
though  no  such  aflfidavlt  is  required  of  natural  persons.^ 
A  law  against  combinations  to  lessen  competition  and  con- 
trol prices  may  be  applied  to  manufacturers  and  vendors 
of  commodities,   though  It  exempts  purchasers  of  such 

^ Fifth  Ave.  Coach  Co.  v.  City  of  N.Y.,  221  U.S.  467. 

^Murphy  v.  California,  225  U.S.  623. 

^  German  Alliance  Ins.  Co.  v.  Leiuis,  233  U.S.  389. 

*  Griffith  v.  Conn.,  218  U.S.  563. 

^  Terrace  v.  Thompson,  263  U.S.  197. 

^Mallinckrodt  Chemical  Works  v.  Missouri,  238  U.S.  41. 


EQUALITY  BEFORE  THE  LAW  249 

commodities  and  persons  selling  labor.  Whether  com- 
binations of  purchasers  and  of  wage  earners  also  require 
repression  is  for  the  legislature  to  decide.^ 

Where  size  is  an  index  to  an  admitted  evil,  the  law  may 
discriminate  between  the  great  and  the  small. ^  A  regula- 
tion preventing  payment  of  coal  miners  on  the  basis  of 
screened  coal  may  exempt  mines  employing  fewer  than  ten 
men.^  Stricter  regulations  may  be  imposed  on  private 
banks  doing  business  with  poor,  ignorant  immigrants  than 
on  other  banks.*  A  stockyard  company,  however  is  de- 
nied equal  protection  when  its  charges  are  limited  and 
those  of  smaller  companies  are  not,  without  regard  to  the 
character  or  value  of  the  services  rendered.^ 

Though  a  state  may  regulate  some  occupations  and  fail 
to  regulate  others,  the  regulations  must  operate  with  sub- 
stantial fairness  on  those  similarly  situated.^  A  classifica- 
tion is  arbitrary  that  prescribes  sanitary  regulations  for 
bakeries  making  biscuit,  bread,  and  cake,  and  does  not 
include  bakeries  making  crackers  and  pie.'^  A  statute  re- 
quiring semimonthly  payments  for  cream  or  milk  only 
from  purchasers  for  resale  or  manufacture  is  a  denial  of 
equal  protection.^  Though  a  state  may  prescribe  what- 
ever condition  it  sees  fit  for  permitting  a  foreign  insurance 

'^International  Harvester  Co.  v.  Missouri,  234  U.S.  199,  210. 

-Engel  v.  O'Malley,  219  U.S.  128,  138. 

^McLean  v.  Arkansas,  211  U.S.  539. 

*Engel  v.  O'Malley,  219  U.S.  128. 

^  Cotting  v.  Kansas  City,  etc.,  Co.,  183  U.S.  79,  112. 

^  Noble  V.  State,  66  So.  (Fla.)   153. 

''State  V.  Miksicek,  125  S.W.  (Mo.)  507. 

^  State  V.  Latham,  98  Atl.  578,  579. 


250  THIS  ECONOMIC  WORLD 

company  to  transact  business  within  its  limits,^  it  cannot 
prohibit  its  residents  from  making  contracts  of  insurance 
in  another  state.^ 

The  liberty  of  contract  relating  to  labor  equally  in- 
cludes both  parties;  the  one  has  as  much  right  to  purchase 
labor  as  the  other  to  sell.^  The  right  of  the  purchaser  to 
prescribe  conditions  for  accepting  labor  is  the  same  as  the 
right  of  the  seller  to  prescribe  conditions  for  offering  it; 
the  employer  may  discharge  the  employee  because  of 
membership  in  a  labor  union,  and  the  employee  may  quit 
work  because  the  employment  is  not  confined  to  union 
men.  It  is  not  within  the  function  of  free  government,  in 
the  absence  of  contract  between  the  parties,  to  compel  any 
person  to  accept  personal  service  nor  to  compel  any  person 
to  perform  personal  service.  Legislation  that  disturbs 
this  equality  is  an  arbitrary  interference  with  the  liberty 
of  contract  and  inconsistent  with  equality  before  the  law.^ 

A  classification  may  be  territorial.  The  Fourteenth 
Amendment  does  not  aim  to  secure  to  all  persons  in  the 
United  States  the  benefit  of  the  same  laws.  Diversities 
may  exist  in  two  states  separated  only  by  an  imaginary 
line,  or  even  in  different  parts  of  the  same  state."^  A  legis- 
lature may  create  road  commissions  in  counties  of  not  less 
than  70,000  and  not  more  than  90,000  people,^  authorize 
the  appointment  of  court  stenographers  in  counties  of  not 

^Phil.  Fire  Ass'n  v.  New  York,  119  U.S.  no. 

^  Allgeyer  v.  Louisiana,  165  U.S.  578. 

^  Lochner  v.  Ne<w  York,  198  U.S.  45. 

^  Adair  v.  United  States,  208  U.S.  161,  174,  175. 

^Missouri  v.  Leivis,  loi  U.S.  22,  31. 

^  State  V.  Maioney,  65  S.W.  (Tenn.)  871. 


EQUALITY  BEFORE  THE  LAW  251 

less  than  30,000  and  not  more  than  200,000  population,^ 
regulate  the  charges  of  grain  elevators  in  cities  of  over 
130,000  people,^  or  prescribe  a  registration  law  for  cities 
of  over  300,000  people,  even  though  only  one  city  in  the. 
state  has  over  300,000  people.^  The  manufacture  of  brick 
may  be  prohibited  within  a  prescribed  area.^  A  distinc- 
tion may  be  made  between  the  business  and  residential  sec- 
tions of  a  city  as  to  the  heights  permitted  for  buildings.^ 
Hunting  and  fishing  may  be  prevented  In  one  portion  of  a 
state  and  permitted  elsewhere.^  Though  statutes  regulat- 
ing the  hunting  of  game  must  affect  alike  all  persons  simi- 
larly situated  with  reference  to  that  sport,''^  an  assumption 
by  a  legislature  that  unnaturalized  foreign  born  residents 
are  peculiarly  a  source  of  danger  to  wild  birds  or  animals 
is  not  so  unwarranted  as  to  be  arbitrary.^ 

Sex  may  be  a  basis  of  classification.^  Laws  limiting 
the  hours  of  labor  for  female  employees  may  be  valid 
when  similar  statutes  for  males  would  be  Invalid. ^'^  A 
Massachusetts  statute  prohibiting  all  women  from  labor- 
ing In  any  factory  more  than  sixty  hours  a  week^^  and  an 

^  State  V.  Frater,  147  Pac.  (Wash.)  25. 

^  Budd  V.  Neiv  York,  143  U.S.  517. 

^  Mason  v.  Missouri,  179  U.S.  328. 

*  Hadacheck  v.  Sebastian,  239  U.S.  394. 

^  Welch  V.  Sivasey,  214  U.S.  91. 

^Barker  v.  State  Fish  Com'n,  152  Pac.  (Wash.)  537. 

'Harper  v.  Gallozi'ay,  51  So.  (Fla.)   226. 

"Patsone  v.  Comm.  of  Penn.,  232  U.S.  138. 

^People  V.  Hu§,  249  111.  164,  169. 
^^  State  V.  Dominion  Hotel,  151  Pac.  (Ariz.)  958. 
"  Commonviealth  v.  Hamilton,  etc.,  Co.,  120  Mass.  383. 


252  THIS  ECONOMIC  WORLD 

Oregon  statute  prohibiting  any  female  in  certain  industries 
from  working  more  than  ten  hours  a  day^  were  constitu- 
tional. Sex  alone  will  not  serve  in  all  cases  as  a  sufficient 
basis  for  regulating  the  hours  of  labor  i^  the  ancient  in- 
equality of  women,  otherwise  than  physical,  is  diminish- 
ing. In  view  of  the  great  changes  culminating  in  the 
Nineteenth  Amendment,  these  differences  have  almost 
ceased  to  exist.  Though  physical  differences  must  still  be 
recognized  in  appropriate  cases,  women  no  longer  require, 
and  cannot  be  subjected  to,  restrictions  upon  their  liberty 
of  contract  which  could  not  lawfully  be  imposed  upon  men 
in  similar  circumstances.  Consequently,  an  act  of  Con- 
gress providing  minimum  wages  for  women  in  the  District 
of  Columbia  was  an  unreasonable  invasion  of  the  right  of 
contract  and  was  unconstitutional.^ 

In  making  regulations  for  the  public  welfare  by  virtue 
of  the  police  power,  the  state  may  classify  people  accord- 
mg  to  race.  It  may  require  that  different  races  be  sepa- 
rated In  public  conveyances.^  This  separation  Is  no  badge 
of  inferiority  on  either  race.  The  restriction  applies 
equally  to  both  races  and  can  be  regarded  as  a  badge  of 
Inferiority  only  because  one  race  chooses  to  put  that  con- 
struction on  it.^  The  accommodations  provided  for  the 
different  races  must  be  equal. ^  The  United  States  Circuit 
Court  of  Appeals,  however,  has  held  that  equality  of 

^  Muller  V.  Oregon,  208  U.S.  412. 

-People  V.  Elerding,  254  111.  579,  583. 

^Adkins  V.  Children's  Hospital,  261  U.S.  525. 

*  Plessy  V.  Ferguson,  163  U.S.  537. 

^Idem,  SSI.     . 

^McCabe  v.  Atchison,  etc.,  R.  Co.,  235  U.S.  151,  160. 


EQUALITY  BEFORE  THE  LAW  253 

service  does  not  mean  identity  of  service;  that  luxuries  in 
public  conveyances — sleeping  and  dining  cars — must  be 
furnished  for  all  races,  if  furnished  for  one  race,  only 
when  the  demand  is  substantially  the  same.^  Though  this 
portion  of  the  decision  was  criticised  in  a  dictum  of  the 
United  States  Supreme  Court  for  making  "the  constitu- 
tional right  depend  upon  the  number  of  persons  who  may 
be  discriminated  against,"^  the  case  was  affirmed  and  is, 
presumably,  still  the  law. 

The  state  may  provide  also  that  different  races  must  be 
separated  in  public  schools.^  Such  segregation  does  not 
constitute  an  exclusion  from  the  public  schools.*  The 
educational  requirements  for  all  races  must  be  equally 
satisfied.  Equality  before  the  law  guarantees  civil  and 
political  equality  but  not  social  equality.  When  the  gov- 
ernment has  secured  to  each  of  its  citizens  equal  rights 
before  the  law  and  equal  opportunities  for  Improvement 
and  progress,  it  has  accomplished  its  function.  If  one 
race  be  inferior  to  another  socially,  the  Constitution  of  the 
United  States  cannot  put  them  on  the  same  plane.^ 

Marriages  between  whites  and  negroes  may  be  pro- 
hibited,® preventing  the  amalgamation  of  the  races  being 
a  reasonable  exercise  of  the  police  power.  The  restric- 
tion necessarily  applies  equally  to  both  races  and  is  no 

1  McCahe  v.  Atchison,  etc.,  R.  Co.,  186  Fed.  966. 

^McCabe  v.  Atchison,  etc.,  R.  Co.,  23S  U.S.  151,  161. 

^  Berea  College  v.  Commonivealth,  94  S.W.  (Ky.)   623. 

*  Cory  V.  Carter,  48  Ind.  327. 

^  Plessy  V.  Ferguson,  163  U.S.  537,  Sgi. 

^  State  V.  Tutty,  41  Fed.  753. 


254  THIS  ECONOMIC  WORLD 

denial  of  equal  protection.^  Such  a  statute  is  no  invasion 
of  the  right  of  contract;  marriage  is  not  a  mere  contract, 
but  a  status  or  institution." 

Exclusion  of  negroes  from  juries  is  a  denial  of  equal 
protection.^  Juries  are  to  be  selected  without  regard  to 
race  or  color.*  An  accused,  however,  has  no  legal  right 
to  a  jury  composed  of  his  own  race;  he  can  demand  only 
a  jury  from  which  his  own  race  is  not  arbitrarily  excluded.^ 

More  severe  punishment  may  be  placed  on  crimes,  like 
sex  offenses,  when  committed  between  persons  of  different 
races  than  when  committed  between  persons  of  the  same 
race;^  but  a  statute  is  void  whereby  an  act  is  a  crime  if 
committed  by  a  person  of  one  race  and  is  not  a  crime  if 
committed  by  a  person  of  another  race,  as  when  the  ad- 
mission of  a  woman  under  twenty-one  into  a  restaurant 
constitutes  a  crime  only  when  the  establishment  is  oper- 
ated by  a  Chinaman."^ 

An  ordinance  is  unconstitutional  which  requires  inhabi- 
tants of  a  certain  race  to  move  from  a  portion  of  a  city 
heretofore  occupied  by  them.^  The  Virginia  Supreme 
Court  of  Appeals  upheld,  as  a  valid  exercise  of  the  police 
power  for  preventing  breaches  of  the  peace,  immorality, 
and  dangers  to  health,  an  ordinance  of  the  City  of  Rich- 

1  State  V.  Tutty,  41  Fed.  753,  757- 

""Idem,  758,  759- 

^  Strauder  v.  West  Virginia,  100  U.S.  303. 

^  Leach  v.  State,  62  S.W.   (Tex.)  422. 

^Virginia  v.  Rives,  100  U.S.  313. 

^Pace  V.  Alabama,  106  U.S.  583. 

'/n  re  Opinion  of  Justices,  207  Mass.  601. 

"  In  re  Lee  Sirtg,  43  Fed.  359. 


EQUALITY  BEFORE  THE  LAW  255 

mond  forbidding  any  white  person  to  occupy  as  a  resi- 
dence any  building  in  any  street  where  the  greater  number 
of  houses  are  occupied  as  residences  by  colored  people, 
and  forbidding  any  colored  person  to  occupy  as  a  resi- 
dence any  building  in  any  street  where  the  greater  number 
of  houses  are  occupied  as  residences  by  white  people.^ 
Since  this  decision,  the  United  States  Supreme  Court  has 
declared  invalid  an  ordinance  of  Louisville,  Kentucky, 
which  was  similar,  except  that  the  attempted  segregation 
was  by  "blocks"  instead  of  "streets."  The  right  which, 
according  to  the  Supreme  Court,  was  improperly  invaded 
was  the  civil  right  of  a  white  person  to  dispose  of  his 
property  to  a  colored  person  and  of  a  colored  person  to 
dispose  of  his  property  to  a  white  person.^  More  re- 
cently, the  Virginia  court  has  held  that  its  former  decision 
was  in  effect  reversed  by  this  Supreme  Court  case.^ 

The  property  of  every  person  within  the  several  juris- 
dictions is  subject  to  the  power  of  eminent  domain  pos- 
sessed by  the  state  and  Federal  governments.  The  taking 
of  property  by  eminent  domain  must  be  for  a  public  use 
or  it  is  without  due  process  of  law.*  A  legitimate  public 
object  is  not  deprived  of  its  public  character  because  it  is 
of  incidental  benefit  to  private  interests.^  Land  acquired, 
not  only  for  such  purposes  as  the  site  for  a  post  office  or 
the  widening  of  a  street,  but  even  for  such  a  purpose  as 

1  Hopkins  V,  Richmond,  86  S.E.  (Va.)  139. 

^  Buchanan  v.  IVarley,  245  U.S.  60. 

^Irvine  v.  Clifton  Forge,  97  S.E.  (Va.)  310. 

*  Matter  of  Tuthill,  163  N.Y.  133,  138. 

5  Stockton,  etc.,  R.  Co.  v.  Stockton,  41  Calif.  147,  189. 


2s6  THIS  ECONOMIC  WORLD 

the  right  of  way  for  a  railroad,  is  for  a  public  use  if  the 
railroad  serves  the  public,  though  it  be  owned  and  oper- 
ated by  private  individuals.^  The  cost  of  a  public  im- 
provement may  be  assessed  on  the  property  to  be 
benefited.^  The  boundary  lines  defining  the  limits  for 
assessment  must  be  reasonable.  When  they  are  arbitrary, 
as  where  they  meander  to  include  land  at  unequal  dis- 
tances from  a  street  which  is  to  be  paved,^  or  where  they 
include  land  within  a  drainage  district  to  obtain  revenue 
and  not  to  benefit  the  land,"*  they  constitute  a  denial  of  due 
process  of  law  and  equal  protection. 

The  property  of  every  person  is  subject  to  the  power  of 
taxation.  The  power  of  the  state  to  tax  extends  to  all 
persons  and  property  within  its  jurisdiction,^  but  it  is  lim- 
ited to  them^  and  cannot  reach  the  person  of  a  nonresi- 
dent.'^ Taxation  for  other  than  a  public  use^  or  without 
jurisdiction  is  not  due  process  of  law.  When  a  corpora- 
tion has  property  in  more  than  one  state,  each  state  may 
tax  only  the  portion  within  that  state. ^  When  specific  ar- 
ticles of  personal  property  are  constantly  changing,  the  tax 
may  be  fixed  by  a  valuation  of  the  average  amount.^'' 

''■Stockton,  etc.,  R.  Co.  v.  Stockton,  41  Calif.  147,   1S9. 
2  Walston  V.  Nevin,  128  U.S.  578. 
^  Gast,  etc.,  Co.  v.  Schneider  Granite  Co.,  240  U.S.  55. 
^Myles  Salt  Co.  v.  Iberia  Drainage  Dist.,  239  U.S.  478. 
^  Society  for  Savings  v.  Coite,  6  Wall.  S94,  605. 
^  Deiuey  V.  Des  Moines,  173  U.S.  193,  203. 
'  Idem. 

^Matter  of  Tuthill,  163  N.Y.  133,  138. 
^  Delaivare,  etc.,  R.  Co.  v.  Pennsylvania,  198  U.S.  341. 
^'^Am.  Refrigerator  Transit  Co.  v.  Hall,  174  U.S.  70,  82. 


EQUALITY  BEFORE  THE  LAW  257 

Wide  discretion  Is  permitted  in  the  classification  of 
property  for  taxation,  and  the  classes  thus  created  may  be 
taxed  differently,  as,  for  example,  savings  banks,^  unincor- 
porated banks, 2  insurance  companies,  unincorporated  in- 
surance associations,^,  telegraph  companies,"*  telephone 
companies,^  wholesale  merchants,^  retail  merchants,'^  land 
used  for  agriculture  and  for  other  purposes,^  railroads,^ 
subclassifications  of  railroads,  such  as  steam  and  street 
railroads,^^  or  surface  and  subsurface  railroads. ^^ 

Corporations  may  be  subjected  to  taxes  not  imposed  on 
individuals.^-  Merchants  may  be  taxed  according  to  the 
amount  of  their  sales. ^^  A  state  does  not  deny  the  equal 
protection  of  the  laws  when  It  provides  a  method  of  taxing 
the  property  of  railroad  corporations  different  from  that 
applied  to  the  property  of  other  corporations  or  indi- 
viduals, though  they  incidentally  own  or  operate  railroads; 
the  fact  that  railroad  corporations  are  vested  with  dif- 
ferent powers  from  those  of  other  corporations  or  Indi- 

'^  Farmers',  etc.,  Bank  v.  Minnesota,  232  U.S.  516. 

-Johnson  County  v.  Johnson,  89  N.E.  (Ind.)  59c. 

^N.Y.  Fire  Dept.  v.  Stanton,  159  N.Y,  225. 

*  State  V.   Western   Union,  124  N.W.   (Minn.)   380. 

5  Idem. 

^  Knisely  v.   Cottrel,  196  Pa.  614. 

^  Idem. 

^  Clark  V.  Kansas  City,  176  U.S.  114. 

8  Ohio  Tax  Cases,  232  U.S.  576. 

^°  Puffet  Sound  Co,  v.  King  County,  264  U.S.  22,  27. 
"  People  V.  State  Board,  199  U.S.  i,  47. 
^-  Bank  of  Commerce  v.  Senter,  260  S.W.  (Tenn.)   144,  149. 
"  Clark  V.  Titusville,  184  U.S.  329. 


258  THIS  ECONOMIC  WORLD 

vlduals  is  a  sufficient  reason  for  the  separate  classification.^ 
A  classification  is  valid  where  a  state  imposes  a  tax  on  the 
business  of  express  companies,  though  it  does  not  impose 
a  like  tax  on  railroad  or  steamboat  companies  which  carry 
express  matter;  the  fact  that  the  railroad  and  steamboat 
companies  pay  taxes  on  tangible  property  and  that  express 
companies  have  little  tangible  property  furnishes  a  valid 
basis  for  the  classification.- 

As  an  incident  to  a  state's  power  to  select  persons  and 
property  to  be  taxed,  it  may  grant  exemptions  from  taxes,^ 
provided  that  such  exemptions  are  reasonable.*  Incomes 
below  a  certain  amount  may  be  exempted.^  Transfer 
taxes  may  be  confined  to  a  particular  kind  of  property, 
such  as  shares  of  corporate  stock.^  A  transfer  tax  on 
shares  of  stock  is  not  invalid  because  the  transfer  of  bonds 
is  not  included.^  A  license  tax  may  be  imposed  on  hand 
laundries  operated  by  men  though  none  is  imposed  on 
those  operated  by  women. ^  If  a  legislature  deems  it 
advisable  to  put  a  lighter  burden  on  women  than  on  men 
in  an  employment  commonly  regarded  as  more  appro- 
priate for  women,  the  Fourteenth  Amendment  does  not 
interfere  by  creating  a  fictitious  equality  where  there  is  a 

^Mich.  R.  Tax  Cases,  138  Fed.  223. 

-Pac.  Exp.  Co.  V.  Seibert,  142  U.S.  339,  353.  354- 

^Magoun  v.  ///.  etc.,  Bank,  170  U.S.  283,  299. 

*  Peacock  &  Co.  v.  Pratt,  121  Fed.  772,  777. 

^Idem,  777,  778. 

^  Hatch  V.  Reardon,  204  U.S.  152,  158. 

'  Idem. 

^Quong  Wing  \.  K'trkendall,  233  U.S.  Sg, 


EQUALITY  BEFORE  THE  LAW  259 

real  difference.^  This  decision,  however,  was  rendered 
before  the  adoption  of  the  Nineteenth  Amendment.  A 
license  tax  may  be  imposed  on  wholesale  dealers  in  oils 
though  none  is  imposed  on  wholesale  dealers  in  other 
merchandise,-  on  houses  packing  meat  though  none  is  im- 
posed on  those  packing  vegetables,^  on  the  sale  of  oleo- 
margarine though  none  is  imposed  on  the  sale  of  butter,* 
on  selling  sewing  machines  from  a  delivery  wagon  though 
none  is  imposed  on  selling  them  from  a  store. ^ 

Arbitrary  selection  cannot  be  justified  by  calling  it 
classification.^  Though  the  equal-protection  clause  does 
not  require  taxes  to  be  levied  by  a  uniform  method  and  at 
the  same  rate  on  all  classes  of  property,"^  the  franchises 
and  property  of  one  corporation  cannot  be  assessed  at  a 
different  rate  or  by  a  different  method  from  those  of  other 
corporations  of  the  same  class. ^  A  classification  for  taxa- 
tion is  arbitrary  that  discriminates  between  citizens  and 
nonresidents,®  or  between  goods  manufactured  for  sale  in 
a  state  and  those  manufactured  for  export, ^^  or  taxes  the 
employment  of  aliens  only.^^     Greater  or  different  taxes 

^  Quong  JVing  v.  Kirkendall,  223  U.S.  59,  63. 

-  Southivestern  Oil  Co.  v.  Texas,  217  U.S.  114. 

^Armour  Packing  Co.  v.  Lacy,  200  U.S.  226,  236. 

^Hammond  Packing  Co.  v.  Montana,  233  U.S.  331. 

^Singer,  etc.,  Co.  v.  Brickell,  233  U.S.  304. 

^Southern  Ry.  Co.  v.  Greene,  216  U.S.  400,  417. 

'^Peacock  &  Co.  v.  Pratt,  121  Fed.  772. 

^Raymond  v.  Chicago  Traction  Co.,  207  U.S.  20,  37. 

^Walling  v.  Michigan,  116  U.S.  446,  461. 
^°  State  V.  Bengsch,  170  Mo.  81. 
^  Fraser  v.  McConivay,  etc.,  Co.,  82  Fed.  257. 


26o  THIS  ECONOMIC  WORLD 

may  be  Imposed  on  foreign  than  on  domestic  corporations 
as  a  condition  of  admission  Into  the  state. ^  A  corpora- 
tion Is  a  "domestic"  corporation  In  the  state  of  Its  crea- 
tion; It  is  a  "foreign"  corporation  In  all  other  states.^ 
When  a  foreign  corporation  has  come  Into  a  state  In  com- 
pliance with  Its  laws  and  has  acquired  property  of  a 
permanent  nature,  It  cannot  be  subjected  to  more  burden- 
some taxes  than  are  Imposed  on  a  domestic  corporation 
doing  business  of  the  same  character.^ 

''^  Horn  Silver  Mining  Co.  v.  New  York,  143  U.S.  305,  314. 

^  Idem. 

^Southern  Ry.  Co.  v.  Greene,  216  U.S.  400. 


VIII 


THE  NECESSITOUS  MAN  AND  THE  LAW 

"Necessitous  men  are  not,  truly  speaking,  free  men, 
but,  answering  present  exigency,  will  submit  to  any  terms 
that  the  crafty  may  impose  upon  them." — Lord  North- 
ington. 

IN  THE  above  oft-quoted  statement  the  word  "necessi- 
tous" is  the  key  word.  It  is,  to  begin  with,  a  relative 
term.  It  will  be  necessary  to  determine  just  how  necessi- 
tous a  man  must  be  before  he  loses  his  freedom.  We  may 
imagine  extreme  cases  where  the  necessitous  condition  is 
such  as  obviously  to  destroy  the  man's  freedom.  We  may 
also  easily  find  other  cases  where  the  necessity  is  so  slight 
and  the  general  conditions  so  favorable  to  the  man  as  to 
leave  him  free  in  every  political  or  economic  sense. 

An  example  of  the  first  is  the  man  who  is  out  of  work, 
whose  family  is  in  want,  who  has  many  competitors  for 
every  job,  or  who  must  accept  employment  from  a  single 
employer  or  none  at  all.  Such  a  man  may  be  assumed  to 
be  under  the  coercion  of  unfortunate  circumstances.  It 
would  perhaps  be  more  accurate  to  say  that  his  bargaining 
power,  in  comparison  with  that  of  his  prospective  em- 
ployer, is  very  low,  or  that  that  of  his  prospective  em- 
ployer is  very  high.  At  any  rate,  their  bargaining  power 
is  very  unequal. 

261 


262  THIS  ECONOMIC  WORLD 

An  example  of  the  second  class,  that  Is,  of  a  man  whose 
necessity  is  so  slight  and  whose  circumstances  so  favor- 
able as  to  leave  him  a  free  man  politically  and  economi- 
cally, is  a  laborer  who  has  a  good  job  and  knows  where 
he  can  get  several  others  if  he  wants  another,  who  has  no 
more  competitors  for  his  present  job  than  he  has  oppor- 
tunities for  a  new  job,  who  lives  in  a  community  where 
the  labor  market  is  not  overcrowded,  but  where  employers 
are  looking  for  men  instead  of  men  looking  for  jobs.  If 
such  a  man  is  not  thoroughly  free  and  independent,  it  is 
because  of  some  defect  of  his  character.  Observation  and 
experiment  will  convince  anyone  that  there  are  laborers  in 
this  condition  today  and  that  they  are  a  very  independent 
group  of  individuals.  Any  attempt  to  browbeat  or  other- 
wise impose  upon  one  of  them  will  be  followed  by  unfor- 
tunate results  to  the  one  who  makes  the  attempt. 

During  considerable  periods  of  time  and  In  many  parts 
of  the  world,  the  majority  of  wage  workers  have  been  In 
the  first  of  these  conditions  and  only  a  few  in  the  second. 
Recently,  In  this  country  the  ratios  have  been  changing. 
Decreasing  numbers  find  themselves  in  the  first  of  these 
conditions  and  Increasing  numbers  in  the  second.  This  at 
least  suggests  the  possibility  of  still  further  changing 
ratios  until  the  vast  majority  of  laborers  will  find  them- 
selves In  the  second  of  these  conditions,  in  which  case  the 
vast  majority  of  laborers  will  be  quite  as  free  as  capital- 
ists or  anyone  else,  and  the  term  "wage  slave"  can  be  used 
no  more  except  for  purposes  of  perversion. 

An  analysis  of  the  laws  of  distribution  strengthens  the 
suggestion  that  It  is  possible  to  bring  about  conditions  in 


THE  NECESSITOUS  MAN  AND  THE  LAW     263 

which  the  average  laborer  will  be  quite  as  independent  as 
the  average  capitalist,  landowner,  professional  man,  or 
the  average  of  any  other  group.  This  may  be  accom- 
plished by  so  increasing  the  occupational  mobility  of  labor 
as  to  thin  out  the  numbers  in  every  overcrowded  occupa- 
tion and  increase  the  numbers  in  those  occupations  where 
men  are  now  scarce.  The  occupational  balance  resulting 
from  this  occupational  redistribution  would  tend  to  equal- 
ize the  bargaining  power  of  men  in  different  occupations 
and  leave  them  all  relatively  free  because  none  would  be 
in  that  necessitous  condition  which  destroys  freedom. 

All  this  could  be  done  without  modifying  that  legal 
freedom  of  contract  which  now  exists.  In  other  words, 
legal  freedom  to  make  contracts  would  not  result  in  the 
economic  enslavement  of  the  necessitous  man,  because 
there  would  be  no  necessitous  men  in  the  sense  in  which 
Lord  Northington  used  that  term.  Meanwhile,  how  does 
the  necessitous  man  stand  before  the  law? 

Society  of  today  differs  from  that  of  centuries  ago  by 
the  enlarged  sphere  of  voluntary  contract.  Ancient  law 
fixed  a  man's  permanent  social  position  at  his  birth; 
modern  law  allows  him  to  create  it  for  himself.^  The  en- 
forcement of  voluntary  contract,  especially  in  America, 
enables  a  person,  born  in  poverty,  to  acquire  comfort,  even 
wealth  and  power,  if  he  possesses  capacity  and  exercises 
it  industriously. 

Our  liberty  of  contract,  however,  is  being  assailed  from 
both  extremes  of  a  social  controversy.  Since  freedom  of 
contract  affords  opportunity  for  the  ambitious  man,  we 

^  Maine,  Ancient  Laiv  (Pollock's  edition),  p.  319. 


264  THIS  ECONOMIC  WORLD 

can  understand  his  objection  to  restraint,  even  though  we 
may  not  be  willing  to  yield  to  his  demands.  We  find 
difficulty  in  understanding  why  an  ambitious  man  should 
wish  for  greater  restrictions.  The  restraint  which  he 
would  impose  on  others  must  apply  also  to  himself;  in  this 
country,  no  state  may  deny  to  any  person  within  its  juris- 
diction the  equal  protection  of  the  laws.^  Though  the 
poorer  classes  have  profited  most  by  freedom  of  contract 
in  the  past  and  will  profit  most  in  the  future,  from  their 
spokesmen  comes  a  demand  for  its  restriction.  These 
delegated,  or  self-delegated,  spokesmen  declare  that  a 
poor  man  is  a  necessitous  man;  that  a  necessitous  man  is 
not  a  free  man;  that  he  should  be  further  deprived  of  his 
right  of  voluntary  contract  because  someone  might  take 
advantage  of  his  need. 

The  poor  man  secured  freedom  and  opportunity 
through  the  right  of  voluntary  contract;  he  will  lose  both 
to  the  extent  in  which  that  right  is  denied.  Without  the 
right  of  voluntary  contract,  society  will  stagnate.  Initia- 
tive and  character  develop  only  with  responsibility.  A 
child  who  is  coddled  and  has  his  problems  solved  for  him 
grows  into  a  helpless  youth.  Conduct  a  stranger  through 
the  city  of  Boston  every  day  for  a  month,  and  its  crooked 
streets  will  still  be  a  labyrinth  to  him;  let  him  guide  him- 
self, and  he  will  soon  move  about  with  understanding  and 
assurance.  Without  the  opportunity  and  responsibility 
afforded  by  the  right  of  voluntary  contract,  human 
progress  will  be  arrested.  Men  will  lapse  to  mediocrity; 
they  will  have  no  incentive  for  their  ambition — except  in 

^  Fourteenth  Amendment  to  the  United  States  Constitution. 


THE  NECESSITOUS  MAN  AND  THE  LAW    265 

the  sphere  of  politics.  As  paternalism  increases,  the  com- 
petition for  political  positions  becomes  more  extreme. 

The  argument  for  restrictions  upon  voluntary  contract 
is  made,  apparently,  on  the  assumption  that  our  law 
affords  a  complete  freedom  of  contract;  that  it  permits  the 
strong  to  impose  on  the  weak,  the  fortunate  to  take  un- 
conscionable advantage  of  the  unfortunate.  The  assump- 
tion is  wrong.  Our  law  does  not  permit  entire  freedom 
of  contract;  to  a  rational  extent,  it  does  protect  the  weak 
and  unfortunate.  This  protection  is  not  confined  to 
modern  social  legislation;  it  may  be  found  in  the  estab- 
lished principles  of  the  common  law  and  of  equity  juris- 
prudence. 

A  contract  to  which  a  necessitous  man  is  a  party  may 
come  before  the  courts  in  three  ways:  the  fortunate  party 
may  ask  for  specific  performance;  the  unfortunate  party 
may  ask  that  the  contract  be  rescinded;  the  fortunate 
party  may  sue  for  damages.  Specific  performance  is  an 
equitable  remedy  which  compels  the  performance  of  a 
contract  according  to  its  precise  terms,  or  such  substantial 
performance  as  will  do  justice  between  the  parties.^ 
Where  money  damages  would  be  an  inadequate  compensa- 
tion for  the  breach  of  an  agreement,  the  contractor  may 
be  compelled  to  perform  specifically  what  he  has  agreed 
to  do.^  Since  the  exact  fulfillment  of  the  agreement  is 
not  always  practicable,  specific  performance  may  mean  a 
substantial  performance,  rather  than  a  literal  one.^ 

^Rison  V.  Newberry,  i8  S.E.  (Va.)  916. 

^Black's  Law  Dictionary  (second  edition),  893. 

'II  Bouvier  Laiv  Dictionary  (Rawle's  edition),  1020. 


266  •   THIS  ECONOMIC  WORLD 

Specific  performance  is  usually  involved  in  contracts  for 
the  conveyance  of  real  estate.  Money  damages  are  gen- 
erally found  to  be  adequate  compensation  for  failure  to 
transfer  personal  property^  or  to  perform  personal  service. 
Even  in  such  contracts,  however,  if  the  plaintiff  can  show 
that  money  damages  would  not  be  adequate  compensa- 
tion, he  may  obtain  a  decree  for  specific  performance.^ 

The  necessitous  man  need  have  little  fear  that  a  plain- 
tiff who  has  taken  unfair  advantage  of  his  need  will  obtain 
a  decree  for  specific  performance.  An  ancient  maxim  pro- 
vides that  "he  who  seeks  equity  must  do  equity."  A  plain- 
tiff asking  the  aid  of  an  equity  court  must  stand  in  a 
conscientious  relation  toward  his  adversary;  the  transac- 
tion must  be  fair  and  just,  and  the  relief  requested  must 
not  be  harsh  and  oppressive  upon  the  defendant.^  If  the 
contract  is  unfair,  one-sided,  unjust,  unconscionable,  or 
affected  by  any  other  inequitable  feature,  or  if  its  enforce- 
ment would  be  oppressive  on  the  defendant,  or  would 
prevent  his  enjoyment  of  his  own  rights,  or  would  work 
any  Injustice,  or  if  the  plaintiff  has  obtained  it  by  sharp 
and  unscrupulous  practices,  by  overreaching,  by  trickery, 
by  taking  undue  advantage  of  the  defendant's  position,  by 
nondisclosure  of  material  facts,  or  by  any  other  uncon- 
scionable means,  then  a  specific  performance  will  be  re- 
fused.*    The  oppression  or  hardship  which  induces  the 

^  McGraiv  Co.  v.  Zonta,  etc,  Co.,  190  N.W.  (la.)  129. 

-Tobacco  Groivers'  Co-op.  Ass'n  v.  Battle,  121  S.E.  (N.C.)  629. 

^Pomeroy,  Equity  Jurisprudence,  sec.  400;  Marks  v.  Gates,  154  Fed.  481, 
482. 

*  Koch  V.  Streiiter,  83  N.E.   (111.)   1072,  1077. 


THE  NECESSITOUS  MAN  AND  THE  LAW     267 

court  to  refuse  specific  performance  may  result  from  the 
unequal,  unconscionable  provisions  of  the  contract  or  from 
external  facts  or  circumstances.^  Courts  of  equity  will 
not  lend  their  aid  to  assist  one  In  realizing  upon  an  un- 
conscionable bargain,  even  though  the  contract  possesses 
all  technical  requirements. ^ 

Before  a  contract  can  be  enforced  specifically,  it  must  be 
founded  on  a  valuable  consideration.^  A  valuable  con- 
sideration means  something  of  value,  not  necessarily  the 
full  market  value.  Some  equity  courts  insist  that  the  con- 
sideration be  adequate.^  Generally,  however,  inadequacy 
of  consideration  is  not  in  itself  a  ground  for  refusing 
specific  performance,  unless  it  is  so  gross  as  to  render  the 
contract  unconscionable.®  Inadequacy  of  consideration 
implies  that  the  price  is  either  too  small  or  too  great.^  A 
contract  may  be  fair  even  though  the  price  is  greater  or 
less  than  the  market  value.  If  the  price  is  not  grossly 
inadequate,  or  if  the  defendant  cannot  show  other  uncon- 
scionable conduct  on  the  part  of  the  plaintiff,  the  contract 
probably  is  substantially  fair  under  the  circumstances. 
The  inquiry  as  to  the  adequacy  of  consideration  must  re- 
late to  the  time  the  contract  was  made;  it  is  not  concerned 
with  subsequent  developments.'^ 

^  Pomeroy,  Specific  Performance  of  Contracts,  sec.  185 ;  Sanders  v.  Neiu- 
ton,  37  So.  (Ala.)  340. 

^  Koch  V.  Streuter,  83  N.E.  (111.)   1072,  1077. 

^Alabama  Cent,  R.  Co.  v.  Long,  48  So.   (Ala.)  363,  364. 

*  Bear  Track  Min.  Co.  v.  Clark,  54  Pac.  (Idaho)  1007. 

^  Marks  V.  Gates,  154  Fed.  481,  483. 

®  II  Pomeroy  Equity  Jurisprudence,  sec.  925. 

''Lee  V.  Kirby,  104  Mass.  420,  428. 


268  THIS  ECONOMIC  WORLD 

The  specific  enforcement  of  contracts  calls  for  the  exer- 
cise of  wide  discretion  by  an  equity  court.  This  discretion 
is  not  arbitrary  nor  capricious,  but  sound  and  reasonable, 
governed  as  far  as  possible  by  defined  rules.^  The  con- 
tract must  be  just,  fair,  and  reasonable;  It  must  be  reason- 
ably certain  in  respect  to  the  subject  matter,  the  terms,  and 
stipulations;  it  must  be  founded  on  a  valuable  considera- 
tion.^  Because  of  the  great  variety  of  forms  in  which 
unfairness  may  occur,  however,  the  decision  depends  on 
the  circumstances  of  each  particular  case;^  the  judicial  dis- 
cretion is  only  imperfectly  guided  by  precedents  or  special 
rules.* 

Though  most  courts  of  equity  will  not  refuse  specific 
performance  merely  because  the  price  is  greater  or  less 
than  the  market  value,  the  inadequacy  of  consideration  is 
a  fact  which  may  be  considered  in  determining  the  exist- 
ence of  fraud  or  other  inequitable  conduct  on  the  part  of 
the  plaintiff.  If  the  inadequacy  of  price  is  so  gross  as  to 
shock  the  conscience,  it  may  in  itself  furnish  satisfactory 
and  decisive  evidence  of  fraud.  In  such  a  case  the  fraud 
thus  ascertained,  and  not  the  inadequacy  of  price,  is  the 
reason  for  the  refusal  of  specific  performance.^  The  de- 
fendant is  not  always  required  to  prove  fraud  or  inequit- 
able conduct  on  the  part  of  the  plaintiff.  The  court  may 
not  compel  the  performance  of  an  agreement  in  which  the 

^  Blackivilder  v.  Loveless,  21  Ala.  371. 

"^Alabama  Cent.  R.  Co.  v.  Lonff,  48  So.   (Ala.)   363,  364. 

^Carver  v.  Van  Arsdale,  143  N.E.  (111.)  579,  584. 

^  Blachivilder  v.  Loveless,  21  Ala.  371. 

^  Worth  V.  Watts,  70  Atl.  (N.J.  Eq.)  357,  358. 


THE  NECESSITOUS  MAN  AND  THE  LAW    269 

defendant,  or  his  agent,  has  made  a  mistake,  even  though 
the  plaintiff  is  in  no  way  responsible  for  the  mistake.^  If 
inadequacy  of  consideration,  improvidence,  surprise,  or 
hardship  reveal  unfairness  in  the  contract,  the  court  may 
refuse  specific  performance,  when  the  plaintiff  is  guilty  of 
no  fraud,  and  the  defendant  can  show  no  mistake.^ 

The  legislatures  of  several  states  have  varied  the 
ancient  rules  of  equity  jurisprudence  in  regard  to  specific 
performance.  Statutes  in  California,^  Montana,^  North 
Dakota,^  and  South  Dakota®  provide  that  specific  per- 
formance cannot  be  enforced  against  a  party  to  a  contract 
if  he  has  not  received  an  adequate  consideration;  if  the 
contract  is  not,  as  to  him,  just  and  reasonable;  if  his  assent 
was  obtained  by  the  misrepresentation,  concealment,  cir- 
cumvention, or  unfair  practices  of  the  plaintiff,  or  by  any 
promise  of  the  plaintiff  which  has  not  been  substantially 
fulfilled;  or  if  the  defendant's  consent  was  given  under  the 
influence  of  mistake,  misapprehension,  or  surprise,  except 
that  where  the  contract  provides  for  compensation  In  case 
of  mistake,  a  mistake  within  the  scope  of  such  provision 
may  be  compensated  for,  and  the  contract  specifically  en- 
forced in  other  respects.  If  proper  to  be  so  enforced. 

Such  statutes  are  little  more  than  declaratory  of  the 
old  rules  of  equity  jurisprudence,  except  the  provisions 
about  adequate  consideration.     These  provisions  render  a 

^  Moore  v.  McK'tllip,  194  N.W.   (Neb.)  465,  468. 
^  Shoup  V.  Burnside,  98  Pac.  (Kan.)   202,  204. 
^  Civil  Code  of  California,  sec.  3391. 

*  Revised  Codes  of  Montana,  sec.  8721. 

"^  Compiled  Laws  of  North  Dakota,  sec.  7198. 

*  South  Dakota  Revised  Code,  sec.  2016. 


270  THIS  ECONOMIC  WORLD 

contract  unenforceable  even  though  the  parties  intention- 
ally entered  into  the  contract  fixing  the  inadequate  con- 
sideration.* 

The  legislature  of  Montana  has  stipulated  also  that 
specific  performance  cannot  be  compelled  when  it  would 
operate  more  harshly  upon  the  defendant  than  its  refusal 
would  operate  on  the  plaintiff.^  A  statute  of  Georgia 
provides  that  mere  inadequacy  of  price,  though  not  suf- 
ficient to  rescind  a  contract,  or  any  other  fact  showing  the 
contract  to  be  unfair,  unjust,  or  against  good  conscience, 
may  justify  a  court  in  refusing  to  decree  specific  perform- 
ance.^ 

Another  way  in  which  a  contract  involving  a  necessitous 
person  may  come  before  the  courts  is  by  the  request  of  the 
dissatisfied  party  for  a  cancellation  of  the  agreement. 
Such  a  case  also  is  within  the  jurisdiction  of  a  court  of 
equity,  but  the  former  nomenclature  is  now  reversed — the 
unfortunate  party  is  the  plaintiff  and  the  fortunate  party 
is  the  defendant.  The  aggrieved  person  is  now  asking  for 
"affirmative  relief";  when  he  was  defendant  to  a  bill  for 
specific  performance,  he  was  asking  for  "negative  relief." 
To  procure  this  affirmative  relief,  he  must  prove  a 
stronger  case  than  for  negative  relief.*  Even  though  a 
court  refuses  to  compel  specific  performance,  it  may  on  the 
same  proof  also  refuse  to  cancel  the  contract.^ 


^  Cummings  v.  Roeth,  loi  Pac.   (Calif.)  434. 

^Revised  Codes  of  Montana,  sec.  8723. 

^  Georgia  Civil  Code,  sec.  4637. 

*  Blackiuilder  v.  Loveless,  21  Ala.  371. 

^ Shoup  V.  Butnside,  98  Pac.   (Kan.)   202,  204. 


THE  NECESSITOUS  MAN  AND  THE  LAW     271 

Regardless  of  this  requirement  for  stronger  proof,  an 
equity  court  will  cancel  an  agreement  or  a  deed  in  appro- 
priate cases.  It  protects  the  weak,  the  feeble,  the  inex- 
perienced, and  the  oppressed  from  the  strong,  the  shrewd, 
and  the  crafty,  by  refusing  to  uphold  contracts  or  convey- 
ances when  the  relation  or  condition  of  the  parties,  or  the 
gross  inadequacy  of  the  consideration,  or  the  circum- 
stances surrounding  the  transaction  lead  to  the  presump- 
tion of  fraud,  duress,  undue  influence,  or  gross  imposi- 
tion.^ 

If  the  plaintiff  can  show  that  he  Is  the  victim  of  fraud, 
the  case  presents  no  difficulty;  fraud  vitiates  any  contract. 
The  duress  for  which  a  contract  or  a  deed  may  be  can- 
celed is  a  coercion  through  fear  of  illegal  imprisonment, 
great  bodily  harm,  or  serious  loss  or  damage  to  property.^ 
The  modern  tendency,  furthermore,  is  to  regard  any 
transaction  as  voidable  which  the  party  was  not  bound  to 
enter  and  which  was  coerced  by  fear  of  a  wrongful  act  by 
the  other  party.^  The  doctrine  is  often  employed  to 
cover  every  case  where  a  party  to  a  contract  or  transfer 
was  deprived  of  freedom  of  will.* 

Undue  influence  Is  the  abuse  of  confidence,  or  of  real  or 
apparent  authority,  for  the  purpose  of  obtaining  an  unfair 
advantage  of  another  person's  weakness  of  mind,  necessi- 
ties, or  distress,  or  for  the  purpose  of  constraining  him  to 
do  what  he  would  not  have  done  without  the  exercise  of 


^Prudential  Life  Ins.  Co,  v.  La  Chance,  95  Atl.   (Me.)   223,  226. 
-  Van  Dyke  v.  JVood,  70  N.Y.S.  324,  327. 
^  III  Williston's  Contracts,  sec.  1603. 
*Idem. 


272  THIS  ECONOMIC  WORLD 

such  control.^  Undue  influence  is  a  species  of  fraud; 
sometimes,  perhaps  usually,  it  contains  elements  of  fraud. 
It  may  exist,  however,  without  positive  fraud;  the  terms 
are  not  synonymous.^  Undue  influence  may  be  exerted 
because  of  dependent  or  fiduciary  relation,  mental  or 
physical  weakness,  pecuniary  necessities,  ignorance,  lack 
of  advice,  and  the  like.  The  doctrine  of  equity  concern- 
ing undue  influence  is  very  broad;  it  grants  relief  where 
influence  is  acquired  and  abused,  or  where  confidence  is 
reposed  and  betrayed.^  Undue  influence  is  a  kind  of 
mental  coercion  which  destroys  a  person's  free  agency  and 
constrains  him  to  act  against  his  will.*  Whenever  a  per- 
son is  in  the  power  of  another  so  that  a  free  exercise  of 
his  judgment  and  will  is  impossible  or  difficult,  or  if  he  is 
in  pecuniary  necessity  and  distress,  so  that  he  would  be 
likely  to  make  any  undue  sacrifice,  and  advantage  is  taken 
of  such  condition  to  obtain  from  him  a  contract  or  con- 
veyance which  is  unfair,  made  upon  an  inadequate  con- 
sideration, and  the  like,  equity  may  grant  afiirmatlve 
relief.^  It  may  set  aside  a  contract  or  conveyance  when 
extreme  necessity  and  distress  have  overcome  a  person's 
free  agency  and  when  oppression,  fraudulent  advantage, 
or  fraudulent  imposition  have  resulted.^  Any  influence 
which,  having  regard  to  the  age  and  capacity  of  a  person, 

^11  Bouvier's  Laiv  Dictionary  (Rawle's  edition),  1157. 
2/n  re  Shell's  Estate,  63  Pac.  (Colo.)  413. 
^11  Pomeroy  Equity  Jurisprudence,  sec.  951. 
^  Beard  v.  Beard,  190  S.W.  (Ky.)  703,  706. 
*  II  Pomeroy  Equity  Jurisprudence,  sec.  948. 

^I   Story  Equity  Jurisprudence    (14th   edition),   sec.   339;   Lomerson  v. 
Johnston,  44  N.J.  £q.  93,  103. 


THE  NECESSITOUS  MAN  AND  THE  LAW     273 

the  nature  of  the  transaction,  and  all  the  circumstances  of 
the  case,  appears  to  have  precluded  free  and  deliberate 
judgment  is  considered  by  courts  of  equity  to  be  undue 
influence  and  is  a  ground  for  setting  aside  the  act  procured 
by  its  employment.^ 

Though  a  force  of  circumstances  for  which  the  other 
contracting  party  is  not  responsible  constitutes  neither 
duress  nor  undue  influence  if  he  knew  of  these  circum- 
stances and  took  advantage  of  them,  a  degree  of  pressure 
which  would  not  ordinarily  amount  to  duress  or  undue 
influence  may  invalidate  the  transaction.^ 

Inadequacy  of  consideration  by  itself  is  usually  insuf- 
ficient reason  for  setting  aside  a  contract^  or  a  deed.^ 
When  the  parties  are  both  in  a  situation  to  form  inde- 
pendent judgment^  and  have  knowingly  and  deliberately 
fixed  upon  any  price,  however  great  or  small,  there  is  no 
occasion  for  interference  by  courts;  owners  have  a  right  to 
sell  property  for  what  they  please,  and  buyers  have  a  right 
to  pay  what  they  please.^  Where  the  inadequacy  of  con- 
sideration, however,  is  accompanied  by  other  inequitable 
incidents  showing  bad  faith,  such  as  concealment,  mis- 
representation, undue  advantage,  or  oppression  on  the 
part  of  the  one  who  obtains  the  benefit,  or  ignorance, 
mental  weakness,  sickness,  old  age,  incapacity,  pecuniary 

^  III  Williston  Contracts,  sec.  1602. 

^  Idem,  sec.  1608. 

^  McLeod  V.  McLeod,  40  So.  (Ala.)  414. 

^  Kline  v.  Kline,  128  Prac.  (Ariz.)  805,  808. 

^  II  Pomeroy  Equity  Jurisprudence,  sec.  926. 

^  Idem,  sec.  927,  note  i. 


274  THIS  ECONOMIC  WORLD 

necessity,  and  the  like,  on  the  part  of  the  other,  an  equity 
court  may  readily  rescind  the  transaction.  It  would  not 
be  correct  to  say  that  such  facts  constitute  an  absolute  and 
necessary  ground  for  equitable  interposition.  They  oper- 
ate to  throw  the  heavy  burden  of  proof  on  the  party 
seeking  the  benefits  of  the  transaction,  to  show  that  the 
other  acted  voluntarily,  knowingly,  intentionally,  and  de- 
liberately, with  full  knowledge  of  the  nature  and  effect  of 
his  acts,  and  that  his  consent  was  not  obtained  by  any 
oppression,  undue  influence,  or  undue  advantage  taken  of 
his  condition,  situation,  or  necessities.^  Even  in  the  ab- 
sence of  these  other  circumstances,  when  the  inadequacy 
of  price  is  so  gross  that  it  shocks  the  conscience  and  fur- 
nishes satisfactory  and  decisive  evidence  of  fraud,  it  will 
be  a  sufficient  ground  for  canceling  a  contract  or  convey- 
ance. In  such  a  case,  fraud  and  not  inadequacy  of  price 
is  the  justification  for  equitable  interference. ^ 

A  brief  digest  of  two  or  three  cases  may  serve  to  illus- 
trate how  a  court  of  equity  uses  its  discretion  when  re- 
quested to  cancel  an  agreement.  A  Kentucky  court  set 
aside  a  transfer  where  a  man  and  his  wife  received  but 
$25  for  a  slave  worth  from  $350  to  $400.  The  court 
found  that  the  plaintiffs  were  "very  destitute  and  their 
necessities  great."^  Though  the  needs  of  spendthrifts 
excite  less  sympathy  than  the  needs  of  people  who  are 
suffering  for  the  necessities  of  life,  even  a  spendthrift  may 
obtain  equitable  relief.     A  plaintiff  of  this  character  ap- 

^  II  Pomeroy  Erjuily  Jurisprudence,  sec.  928. 

2 II  Pomeroy  Equity  Jurisprudence,  sec.  927;  Graff  am  v.  Burgess,  117 
U.S.  180,  192. 

^ Esham  and  luife-v.  Lamar,  10  B.  Monroe  (Ky.)  43. 


THE  NECESSITOUS  MAN  AND  THE  LAW    275 

plied  to  a  Rhode  Island  court  for  a  rescission  of  his  con- 
tract. He  had  obtained  a  loan  of  $2,000  from  a  mort- 
gage broker,  giving  as  security  a  mortgage  on  $10,000 
worth  of  real  estate.  The  note  provided  for  interest  at 
the  rate  of  5^  a  month,  payable  monthly,  the  unpaid  in- 
stallments of  interest  to  draw  interest  at  the  same  rate. 
The  borrower  read  the  note,  but  he  was  unskilled  in  busi- 
ness affairs  and  probably  did  not  comprehend  how  rapidly 
the  interest  would  accumulate.  Though  Rhode  Island 
then  had  no  law  forbidding  usury,  the  court  held  that  the 
defendant  had  taken  an  unconscionable  advantage  of  the 
plaintiff  and  should  receive  only  a  reasonable  rate  of  in- 
terest.* 

A  plaintiff,  who  was  constructing  a  railroad  and  devel- 
oping land  in  Kentucky,  applied  to  money  lenders  of  New 
York  for  a  loan.  The  defendants  took  advantage  of  his 
financial  needs  to  drive  a  hard  bargain  and  one  which  vio- 
lated the  New  York  usury  law.  Except  for  a  modifica- 
tion of  the  interest  rate,  the  court  refused  to  set  aside  the 
contract.  The  court  found  that  the  plaintiff  had  deceived 
the  defendants  in  regard  to  the  amount  of  his  indebted- 
ness. He  was  an  experienced  business  man,  who  knew 
the  effect  of  such  a  contract.  He  could  not  be  relieved 
merely  because  he  had  undertaken  more  than  he  could  ac- 
complish.2  If  negotiations  of  this  character  should  be 
set  aside,  an  inordinate  number  of  commercial  transac- 
tions would  end  in  the  courts.  Business  would  be  so  un- 
certain and  hazardous  that  it  would  stagnate;  it  would 

^  Broivn  V.  Hall,  14  R.I.  249. 
-  Carley  v.  Tod,  31  N.Y.S.  635. 


276  THIS  ECONOMIC  WORLD 

need  to  seek  some  country  whose  government  Interfered 
less  with  voluntary  contract. 

The  States  of  California,!  Montana,^  North  Dakota,^ 
Oklahoma,-*  and  South  Dakota^  have  provided  by  statute 
that  a  party  to  a  contract  may  rescind  it  If  his  consent  was 
given  by  mistake  or  obtained  through  duress,  menace, 
fraud,  or  undue  influence,  exercised  by  the  other  party  or 
with  his  connivance.  Undue  influence,  within  the  mean- 
ing of  these  statutes,^  consists  in  the  use  of  confidence,  or 
of  real  or  apparent  authority,  for  the  purpose  of  obtain- 
ing an  unfair  advantage,  in  taking  an  unfair  advantage  of 
mental  weakness,  or  In  taking  a  grossly  oppressive  and  un- 
fair advantage  of  another's  necessities  or  distress. 

These  statutes  are  declaratory  of  settled  equitable  prin- 
ciples. A  statute  of  Georgia  is  less  Inclusive.  It  provides 
merely  that  great  inadequacy  of  consideration,  joined  with 
great  disparity  of  mental  ability  in  contracting  a  bargain, 
may  justify  a  court  of  equity  In  setting  aside  a  sale  or 
other  contract.'^ 

The  third  way  In  which  a  contract  Involving  a  necessi- 
tous person  may  come  before  the  courts  Is  by  suit  for 
money  damages.     This  Is  a  remedy  of  the  common  law 

^  Civil  Code  of  California,  sec.  1689. 

^  Revised  Codes  of  Montana,  sec.  7563. 

^  Compiled  Laws  of  North  Dakota,  sec.  5934- 

*  Compiled  Oklahoma  Statutes,  sec.  So77- 

°  South  Dakota  Revised  Code,  sec.  904. 

**  Civil  Code  of  California,  sec.  iS7S;  Revised  Codes  of  Montana,  sec. 
7483 ;  Compiled  Laws  of  North  Dakota,  sec.  5852 ;  Compiled  Oklahoma 
Statutes,  sec.  4999;   South  Dakota  Revised  Code,  sec.  819. 

^  Georgia  Civil  Code,  sec.  4630. 


THE  NECESSITOUS  MAN  AND  THE  LAW    277 

and  not  of  equity  jurisprudence.  Upon  denial  of  specific 
performance,  or  of  cancellation,  or  of  both,  the  court  of 
equity  may  leave  the  aggrieved  party  to  enter  a  suit  for 
damages  in  a  court  of  law,  or  it  may  itself  decree  such 
damages  as  the  law  provides.  When  a  case  is  clearly  one 
in  equity  and  both  parties  submit  to  equity  jurisdiction,  it 
is  the  duty  of  the  equity  court,  as  the  rule  is  sometimes 
stated,  to  dispose  finally  of  the  whole  controversy  and 
grant  the  relief  to  which  the  parties  may  be  entitled, 
though  it  be  legal  and  not  equitable  in  character.^  The 
United  States  Supreme  Court  formulates  the  rule  less 
dogmatically  by  saying  that  a  case  may  be  retained  by  the 
equity  court  for  the  purpose  of  granting  full  relief,  when 
jurisdiction  exists.^ 

Upon  being  sued  for  money  damages  in  a  court  of  law, 
the  necessitous  person  who  has  been  grossly  imposed  upon 
need  have  little  fear  of  the  consequences.  Even  under  the 
old  common  law,  fraud  served  as  a  defense.  Under  the 
modern  systems  of  pleading  and  the  fusion  of  law  and 
equity,  an  aggrieved  party  is  usually  able,  in  cases  of  un- 
conscionable agreements,  to  obtain  such  equitable  relief 
as  he  may  be  entitled  to.^ 

The  necessitous  person  when  sued  for  damages  is  not 
only  reasonably  protected  in  theory;  he  is  even  better  pro- 
tected in  practice.  The  plaintiff  can  get  only  such  dam- 
ages as  the  jury  awards.  Juries  are  notorious  for  being 
partial  to  the  "under  dog"  and  for  finding  fraud  on  slight 

^  Gabrielson  v.  Hogan,  298  Fed.  722. 
2  Gormley  v.  Clark,  134  U.S.  338,  349. 
^Sedgwick  Damages  (9th  edition),  sec.  tote. 


278  THIS  ECONOMIC  WORLD 

evidence.  A  North  Carolina  case^  will  serve  as  an  illus- 
tration. A  woman  who  had  signed  an  agreement  permit- 
ting a  power  company  to  erect  towers  on  her  land  for  one 
dollar  apiece  complained  that  the  agent  of  the  company 
had  led  her  to  think  that  she  was  granting  a  right  of  way 
for  "poles"  instead  of  "towers."  Though  the  agent 
denied  making  any  such  representation  and  though  the 
woman  was  well  educated  and  admitted  having  read  the 
contract,  the  jury  "found"  fraud,  and  awarded  her  sub- 
stantial damages.  The  State  Supreme  Court  held  that, 
even  in  the  absence  of  other  evidence,  the  inadequacy  of 
consideration  was  so  gross  as  to  be  sufficient  evidence  of 
fraud  to  justify  a  submission  of  the  question  to  the  jury. 
An  Impartial  critic  might  find  difficulty  in  understanding 
how  a  jury  could  be  convinced  that  an  educated  person 
would  not  know  that  power  companies  use  towers  instead 
of  poles.  The  answer  probably  is  that  the  jury  thought 
the  company  ought  to  pay  an  adequate  price  for  the 
privilege  It  had  acquired. 

Another  practical  consideration  Is  one  which  the  law 
books  never  mention,  but  which  the  practicing  attorney 
will  think  of  first.  A  judgment  against  a  "necessitous" 
person  generally  Is  worthless.  The  plaintiff  will  probably 
realize  nothing  on  it,  except  a  lot  of  trouble  and  expense. 
Even  this  judgment  Is  easily  disposed  of.  A  subsequent 
bankruptcy  schedule  will  probably  disclose  a  situation 
somewhat  as  follows:  liabilities,  the  amount  of  the  judg- 
ment and  costs;  assets,  nothing.  The  remains  of  the  case, 
without  hope  of  resurrection,  will  then  be  Interred  In  the 

^Leonard  v.  Southern  Po<wer  Co.,  70  S.E.  (N.C.)   1061. 


THE  NECESSITOUS  MAN  AND  THE  LAW    279 

vault  of  the  Bankruptcy  Court,  leaving  as  the  one  mourner 
the  person  who  sought  to  take  improper  advantage  of  a 
necessitous  man. 

This  brief  survey  of  our  law  will  serve  to  show,  we 
hope,  that  the  necessitous  man  is  reasonably  protected. 
Further  invasion  of  the  right  of  voluntary  contract  would 
be  inconsistent  with  free  government;  it  would  take  away 
the  responsibility  and  opportunity  necessary  for  the  devel- 
opment of  the  individual  and  for  the  progress  of  the  race. 


IX 


THE  PRESENT  STATUS  OF  THE 
POPULATION  PROBLEM 

MOST  economic  questions  resolve  themselves,  sooner 
or  later,  Into  some  sort  of  a  population  problem. 
Economic  students  can  be  broadly  classified  into  two 
groups:  first,  those  who  recognize  this  problem  and  face  it 
courageously  and  seek  an  intelligent  understanding  of  it; 
second,  those  who  find  it  unpleasant  for  one  reason  or 
another  and  persuade  themselves  that  it  does  not  exist  by 
the  artifice  of  closing  their  eyes  to  some  very  patent  facts. 
Among  the  latter  may  be  mentioned  two  subclasses,  such 
as  those  who,  for  religious  reasons,  feel  a  horror  of  every- 
thing that  has  any  connection  with  the  biological  facts  of 
reproduction,  and  those  who  find  that  the  laws  of  popula- 
tion, as  commonly  expounded,  seem  to  present  an  obstacle 
to  their  particular  schemes  of  social  perfectibility. 

The  latter  group  commonly  assert  that  such  economic 
laws  as  the  principle  of  population  and  the  law  of  dimin- 
ishing returns  from  land  are  inventions  of  the  economists 
to  hinder  the  progress  of  social  reform.  But  such  a  per- 
son Is  capable  of  saying  that  the  law  of  gravitation  was 
an  invention  of  the  physicist  to  hinder  the  progress  of 
aviation.  Economic  laws,  like  physical  laws,  are  things 
to  be  taken  account  of  in  our  plans  and  not  to  be  ignored. 

280 


THE  POPULATION  PROBLEM  281 

These  laws  do  not  prevent  either  social  reform  or  avia- 
tion, but  they  do  indicate  certain  things  that  must  be  done 
if  success  is  to  be  hoped  for  in  either  field.  Gravitation 
did  seem  to  Interfere  with  Darius  Green's  system  of 
aviation.  It  did  not  prevent  the  success  of  the  Wright 
system  because  the  latter  took  full  account  of  it.  The 
law  of  population  does  Interfere  with  the  Darius  Greens 
of  social  reform.  It  does  not  prevent  social  reforms  that 
take  full  account  of  It. 

Among  really  serious  students,  the  population  problem 
has  occupied  a  central  position  in  discussions  of  social  re- 
form since  the  year  1798.  In  that  year  a  book  was  pub- 
lished In  London  entitled  "An  Essay  on  the  Principle  of 
Population  as  It  Affects  the  Future  Improvement  of  So- 
ciety, with  Remarks  on  the  Speculations  of  Mr.  Godwin, 
M.  Condorcet,  and  Other  Writers."  It  is  safe  to  say  that 
this  has  been  one  of  the  most  influential  books  of  modern 
times.  Its  author,  Thomas  Robert  Malthus,  was  a  coun- 
try clergyman  who  had  become  deeply  Interested  In  the 
problem  of  social  improvement  which  was  then  agitating 
the  constructive  minds  of  England  as  it  has  probably  not 
agitated  them  since,  even  down  to  the  present  moment. 
His  father  was  a  scholar  of  some  eminence,  a  correspond- 
ent of  Voltaire  and  the  literary  executor  of  Rousseau. 
He  had  become  a  convert  to  the  somewhat  radical  views 
of  William  Godwin  and  some  of  the  French  communists, 
but  his  son,  Thomas  Robert,  was  not  convinced  by  the 
rather  impressionistic  arguments  of  that  radical  group  and 
held  long  debates  with  his  father  on  the  subject.  He 
thought  that  he  found  serious  obstacles  to  the  perfect!- 


282  THIS  ECONOMIC  WORLD 

bility  of  human  society  by  the  somewhat  easy  methods 
proposed  by  that  group.  These  obstacles,  while  not  in- 
superable, must,  he  felt,  be  taken  into  account  in  any  plan 
for  social  improvement. 

The  thesis  of  the  book  is  contained  in  the  simple 
formula  "The  universal  tendency  of  all  animated  life  to 
increase  beyond  the  means  of  subsistence."  The  argu- 
ment may  be  briefly  summarized  as  follows: 

1.  Every  species  of  plant  and  animal  has  a  reproductive 
power  that  enables  it  to  multiply  faster  than  its  means  of 
subsistence  will  permit,  especially  if  it  is  confined  to  a 
given  area  of  land.  Some  relief,  of  course,  may  be 
afforded  by  emigration,  but  it  will  be  observed  that  the 
necessity  for  emigration  or  the  spreading  over  more  ter- 
ritory is  the  result  of  the  scarcity  of  food  within  the  origi- 
nal, or  any  limited,  habitat.  This  aspect  of  the  problem 
of  migration  is  of  the  very  greatest  importance,  whether 
we  are  considering  plants,  animals,  or  human  beings. 

2.  Human  beings  are  under  the  same  inexorable  law. 
The  physiological  power  of  human  increase  is  very  great 
unless  it  is  checked  by  moral  or  social  restraints  of  some 
kind.  If  these  moral  or  social  restraints  fail  to  operate, 
the  physiological  power  of  increase  is  so  great  as  to  in- 
crease population  to  such  density  that  vice,  misery,  or  war, 
or  all  three  combined,  would  thin  out  the  people  and  thus 
operate  as  a  final,  physical,  or  absolute  check  upon  fur- 
ther increase. 

3.  The  reason  for  the  inability  of  food  to  increase  in- 
definitely in  a  given  area  of  land  is  the  law  of  diminishing 
returns,  which  may  be  briefly  stated  as  follows :     There 


THE  POPULATION  PROBLEM  283 

Is  a  limit  to  the  number  of  plants  of  a  given  kind  that  can 
grow  on  a  given  area  of  land.  Even  before  that  absolute 
limit  is  reached,  efforts  to  increase  the  growth  fail  to  yield 
results  proportionate  to  the  effort  put  forth.  For  ex- 
ample, you  cannot  double  your  wheat  crop  on  a  given 
acreage  by  the  simple  device  of  doubling  the  labor  put  into 
its  cultivation,  or,  if  you  could,  you  could  not  quadruple 
or  quintuple  your  crop  by  a  proportional  increase  in  the 
labor  put  forth.  It  was  the  recognition  of  this  fact  that 
led  Mill,  in  restating  the  law  of  population,  to  argue  as 
follows : 

A  greater  number  of  people  cannot,  in  any  given  state  of  civili- 
zation, be  collectively  so  well  provided  for  as  a  smaller.  The 
niggardliness  of  nature,  not  the  injustice  of  society,  is  the  cause  of 

the  penalty  attached  to  overpopulation It  is  in  vain 

to  say  that  all  mouths  which  the  increase  of  mankind  calls  into 
existence  bring  with  them  hands.  The  new  mouths  require  as 
much  food  as  the  old  ones,  and  the  hands  do  not  produce  as  much. 
If  all  instruments  of  production  were  held  in  joint  property  by  the 
whole  people  and  the  produce  divided  with  perfect  equality  among 
them,  and  if  in  a  society  thus  constituted  industry  were  as  ener- 
getic and  the  produce  as  ample  as  at  present,  there  would  be 
enough  to  make  all  the  existing  population  extremely  comfortable ; 
but  when  that  population  had  doubled  itself,  as,  with  the  existing 
habits  of  the  people,  under  such  an  encouragement,  it  undoubtedly 
would  in  little  more  than  twenty  years,  what  would  then  be  their 
condition?  Unless  the  arts  of  production  were  in  the  same  time 
improved  in  an  almost  unexampled  degree,  the  inferior  soils  which 
must  be  resorted  to  and  the  more  laborious  and  scantily  remuner- 
ative cultivation  which  must  be  employed  on  the  superior  soils,  to 
procure  food  for  so  much  larger  a  population,  would,  by  an  in- 
superable necessity,  render  every  individual  in  the  community 
poorer  than  before.  If  the  population  continued  to  increase  at  the 
same  rate,  a  time  would  soon  arrive  when  no  one  would  have  more 
than  mere  necessities,  and,  soon  after,  a  time  when  no  one  would 


284  THIS  ECONOMIC  WORLD 

have  a  sufficiency  of  those,  and  the  further  increase  of  population 
would  be  arrested  by  death.^ 

To  summarize  this  part  of  the  argument,  it  is  simply 
that  a  larger  number  of  people,  in  a  given  area  and  in  a 
given  state  of  civilization  and  the  industrial  arts,  cannot 
be  so  well  provided  for  as  a  smaller  number.  The  two 
provisos  contained  in  this  summary  are  invariably  over- 
looked by  those  who  combat  it.  They  either  think  in 
terms  of  a  continuous  improvement  in  the  arts  of  produc- 
tion or  they  think  in  terms  of  an  expanding  area  of  land. 
The  proposition  has  never  been  successfully  assailed  by 
anyone  who  has  adhered  strictly  to  these  two  qualifica- 
tions :  a  given  state  of  the  arts  of  production  and  a  given 
area  of  land. 

Most  modern  criticisms  of  Malthus  are  based  upon  the 
observed  fact  that  European  peoples  are  better  fed  today 
than  they  were  at  the  time  Malthus  wrote,  in  spite  of  the 
fact  that  their  numbers  have  greatly  increased.  They 
overlook  the  qualifications  that  Malthus  made,  or  they 
forget  that  there  have  been  some  improvements  in  the 
arts  of  production  during  the  130  years  that  have  elapsed, 
and  they  overlook  the  vastly  more  important  fact  that 
European  peoples  are  drawing  their  subsistence  from 
many  times  the  area  of  land  that  was  necessary  to  pro- 
vide them  with  subsistence  in  1798  and  that  Europeans 
have  been  rather  unscrupulous  in  their  habit  of  taking 
land  from  other  peoples  on  the  American  continent,  in 
Australia,  in  South  Africa,  and  in  various  other  places. 

^John    Stuart    Mill,    Principles    of   Political  Economy    (New    York,    D. 
Appleton  and  Company,  1893),  Vol.  I,  p.  245. 


THE  POPULATION  PROBLEM  285 

4.  Another  important  point  in  the  Malthusian  theory 
is  the  fact  that  there  is  a  strong  natural  instinct  which 
inclines  the  members  of  the  human  species  as  well  as  the 
lower  creatures  to  multiply.  This  instinct  may  be  counter- 
acted by  other  conflicting  instincts  or  even  by  conflicting 
desires,  but  unless  it  is  thus  counteracted  it  will  lead  to  a 
rapid  increase  of  population  and,  in  accordance  with  the 
law  of  diminishing  returns,  this  increase  of  population 
will  go  beyond  the  limits  where  comfortable  subsistence 
is  possible  unless  there  is  migration  to  new  soils  or  an  ex- 
pansion of  commerce  that  will  bring  subsistence  from 
wider  areas. 

5.  This  natural  instinct  is,  however,  opposed  and  held 
in  check  by  several  factors,  leading  in  some  measure  to 
birth  control.  The  first  and  greatest  agency  of  birth  con- 
trol is  human  marriage,  which  substitutes  responsible  par- 
enthood for  irresponsible  parenthood — at  least  on  the 
part  of  those  who  are  capable  of  feeling  a  sense  of  re- 
sponsibility for  their  offspring.  Let  it  be  remembered 
that  marriage  is  not  necessary  to  multiplication.  Multi- 
plication takes  place  more  rapidly  among  those  creatures 
which  have  no  formal  marriage  than  among  those  which 
have  it.  Irresponsible  parenthood,  which  may  be  de- 
scribed by  the  simple  word  spawning,  uniformly  results  in 
a  higher  birth  rate  than  responsible  parenthood,  which 
may  be  called  family  building;  but  family  building  implies 
a  plan  and  the  ability  to  subordinate  the  impulse  of  the 
moment  to  the  larger  plans  of  the  future. 

Where  responsible  parenthood  exists,  the  rate  of  multi- 
plication is  at  least  partly  determined  by  the  ideas  of  the 


286  THIS  ECONOMIC  WORLD 

people  as  to  what  is  necessary  to  the  proper  support  of  a 
family.  If  a  person  is  made  to  feel  a  real  sense  of  re- 
sponsibility and  has  definite  ideas  as  to  what  is  necessary 
to  the  decent  support  of  a  family,  that  person  will  not 
marry  until  he  or  she  feels  reasonably  certain  of  being  able 
to  provide  the  family  with  those  necessary  things. 

6.  The  ideas  that  prevail  on  the  subject  of  what  is  nec- 
essary to  the  decent  or  proper  support  of  a  family  are 
commonly  called  the  standard  of  living.  The  standard  of 
living,  however,  is  something  different  from  the  mere 
habits  of  expenditure.  How  much  money  the  people  are 
in  the  habit  of  spending  or  what  things  they  are  in  the 
habit  of  buying  can  easily  be  determined  by  the  statisti- 
cian. What  constitutes  their  standard  of  living,  however, 
is  something  that  the  mere  statistician,  considered  merely 
as  a  collector  of  facts,  cannot  possibly  find  out,  at  least 
cannot  find  out  unless  he  becomes  a  theorist  and  finds  out 
by  the  method  of  inference.  In  general,  the  standard  of 
living  may  be  said  to  consist  of  those  things  which  indi- 
viduals, one  with  another,  will  be  reasonably  certain  of 
possessing  before  they  will  marry  or  have  children.  Un- 
der this  distinction  we  can  say  generally  that  if  no  one 
will  marry  until  he  has  an  income  of  $5  a  day  or  more, 
then  it  is  certain  that  no  children  will  be  legitimately  born 
except  in  families  that  have  incomes  of  $5  a  day  or  more. 
If  no  one  will  marry  until  he  has  a  bank  account  or  an 
insurance  policy,  then  no  children  will  be  legitimately 
born  except  in  families  that  have  savings  accounts  or  in- 
surance policies.  If  no  one  will  marry  until  he  is  able  to 
afford  an  automobile,  then  no  children  will  be  legitimately 


THE  POPULATION  PROBLEM  287 

born  except  in  families  that  can  afford  automobiles;  and 
so  on. 

Generally,  the  higher  the  standard  of  living,  the  later 
the  age  of  marriage  and  the  smaller  the  number  of  chil- 
dren per  family.  Even  a  slight  retardation  in  the  aver- 
age age  of  marriage  will  make  a  considerable  difference 
in  the  general  rate  of  increase  of  population — first,  by 
reason  of  the  fact  that  generations  are,  on  the  average,  a 
little  further  apart,  and  second,  by  reason  of  the  fact  that 
late  marriages  usually  result  in  smaller  numbers  of  chil- 
dren than  early  marriages. 

The  difference  resulting  from  the  longer  Interval  be- 
tween generations  is  more  important  than  is  commonly 
supposed.  Let  us  suppose  that  in  one  community  the 
standard  of  living  is  so  low  or  the  conditions  of  life  so 
favorable  that  marriages  take  place  very  early  and  that 
the  average  Interval  between  generations  is  25  years — 
that  Is,  generally  speaking,  the  average  age  of  the  parents 
is  25  years  greater  than  the  average  age  of  their  children. 
And  let  us  suppose  that  in  another  community  the  stand- 
ard of  living  is  so  high  and  marriages  take  place  so  late 
In  life  that  the  average  Interval  between  generations  is 
33^  years.  Even  though  the  average  number  of  children 
per  family  were  the  same  In  both  cases,  there  would  soon 
be  a  great  difference  In  the  total  population  of  the  two 
communities.  Let  us  suppose,  for  the  sake  of  simplicity, 
that  in  both  communities  the  average  pair  brings  to  ma- 
turity and  marries  off  4  children.  This  would  mean  that 
the  population  doubled  each  generation,  but  In  the  com- 
munity where  the  generations  were  only  25  years  apart 


288  THIS  ECONOMIC  WORLD 

the  population  would  double  4  times  in  a  century.  In  the 
other  it  would  double  3  times  in  a  century.  If  the  two 
communities  at  the  beginning  of  the  century  had  the  same 
population,  at  the  end  of  the  century  the  one  in  which 
earlier  marriages  took  place  would  have  twice  the  popu- 
lation of  the  other. 

Number  of  years o  25         33^     50         66^/3     75       100 

Increase  of  population: 

First  community i  2                        4                       8         16 

Second  community   i  2                        4                        8 

If,  in  addition  to  this  longer  interval  between  genera- 
tions, the  number  of  children  born  to  each  family  in  which 
marriages  took  place  early  were  greater  than  in  the  one 
where  marriages  took  place  late,  the  difference  would  be 
still  wider.  In  fact,  it  is  the  general  observation  that  in 
those  sections  that  maintain  the  highest  or  at  least  the 
most  expensive  standard  of  living,  population  scarcely 
maintains  itself;  that  is,  there  is  either  no  increase  at  all 
from  generation  to  generation  or,  in  extreme  cases,  there 
is  a  positive  decrease.  If  this  should  be  the  case  in  the 
community  where  late  marriages  prevail,  the  population 
might  remain  stationary,  but  it  might  increase  very  rapidly 
where  early  marriages  prevail. 

Generally  speaking,  economists  have  relied  upon  the 
standard  of  living  to  control  population  automatically. 
Malthus  himself  was  the  leader  in  this  line  of  thought. 
The  greater  part  of  his  volume  on  the  Principle  of  Popu- 
lation is  devoted  to  the  checks  on  population  as  they  op- 
erate in  different  parts  of  the  world,  and  among  these 
checks  the  standard  of  living  is  the  one  to  which  he  gave 


THE  POPULATION  PROBLEM  289 

most  attention.  He  believed  also  that  the  standard  of 
living  tended  to  rise  under  liberal  and  democratic  insti- 
tutions and  with  popular  and  universal  education.  There- 
fore, he  became  an  ardent  advocate  of  liberalism  as  the 
best  means  of  improving  the  conditions  of  the  laboring 
classes.  In  fact,  the  development  of  institutions  and  in- 
dustries in  this  country,  giving  a  free  chance  to  everybody, 
and  our  system  of  universal  and  popular  education,  are 
almost  exactly  what  Malthus  advocated  for  England.  I 
do  not  wish  to  imply  that  the  founders  of  our  Republic  or 
those  who  built  upon  their  foundation  were  greatly  in- 
fluenced by  the  reading  of  Malthus.  I  will  say,  however, 
that  if  they  had  been  devoted  disciples  of  Malthus  and 
had  planned  deliberately  to  embody  in  our  institutions 
the  teachings  of  Malthus,  they  would  not  have  done  very 
differently  from  what  they  did.  Incidentally,  I  may  men- 
tion that  Benjamin  Franklin  was  to  a  certain  extent  a 
forerunner  of  Malthus  in  his  treatment  of  the  population 
question,  and  few  men  had  more  influence  on  the  develop- 
ment of  our  institutions  than  Benjamin  Franklin. 

Unfortunately  for  the  popularity  of  the  great  treatise 
on  the  principle  of  population,  European  colonization,  and 
especially  the  spread  of  European  commerce,  expanded 
the  area  from  which  European  peoples  drew  their  food. 
In  fact,  the  areas  from  which  they  drew  their  food  ex- 
panded more  rapidly  than  the  population  itself.  While 
this  as  an  historical  fact  was  not  anticipated  by  Malthus, 
it  was,  nevertheless,  provided  for  under  his  theory,  which 
was  simply  that  in  a  given  area  the  increase  in  the  produc- 
tion of  food  followed  the  law  of  diminishing  returns  and 


290  THIS  ECONOMIC  WORLD 

that  if  population  continued  to  increase  in  that  area  un- 
checked by  prudential  restraints,  there  must  follow  either 
an  ultimate  shortage  of  food,  or  there  must  be  migration 
to  new  and  larger  areas. 

In  spite  of  the  obvious  soundness  of  this  reservation 
and  the  prominence  which  Malthus  gave  it,  very  few  of 
his  critics  have  ever  shown  enough  discrimination  to  take 
account  of  it.  They  have  commonly  assumed  that  they 
were  refuting  Malthus  when  they  were  merely  pointing 
out  that,  as  the  area  from  which  food  was  drawn  in- 
creased more  rapidly  than  the  population  to  be  fed  upon 
that  food,  the  food  supply  tended  to  grow  more  abundant 
instead  of  less  abundant.  I  know  of  no  subject  in  the 
whole  field  of  intellectual  controversy  in  which  there  has 
been  so  much  persistent  ignoring  of  the  obvious  as  in  this 
subject  of  population  and  food. 

In  order  successfully  to  controvert  Malthus  it  will  be 
necessary  to  show  that  the  present  population  of  Eng- 
land, for  example,  could  be  as  well  fed  from  English  soil 
alone  as  it  was  in  the  days  when  Malthus  wrote.  It  is  ob- 
viously no  refutation  to  show  that  three  times  as  large  a 
population  is  better  fed  from  four  times  as  much  soil. 
It  is  not  an  effective  refutation  to  show  that  over  lOO  mil- 
lions of  people  in  this  country  are  now  as  well  supplied 
with  food  as  5  millions  were  at  the  time  Malthus  wrote. 
It  would  be  necessary  to  show  that  our  present  population, 
in  excess  of  100  million,  could  be  as  well  fed  from  the  soil 
of  the  original  thirteen  states  as  the  5  millions  were  at 
that  time.  As  a  matter  of  fact,  the  migration  of  our 
people  across  the  continent  seems  to  reflect  a  desire  for 


THE  POPULATION  PROBLEM  291 

more  land,  or  a  recognition  of  the  fact  that  more  land  is 
better  than  less  land  in  the  support  of  a  large  population. 

The  preposterous  idea  is  sometimes  suggested  that  the 
spread  of  population  over  wider  and  wider  areas  Is  not 
due  to  the  law  of  diminishing  returns  but  rather  to 
the  desire  for  a  greater  variety  of  food.^  If  there  is 
anything  certain  it  is  that  pioneers  to  new  countries  have 
less  variety  than  those  who  remain  in  the  older  settled 
portions.  Pioneers  into  our  great  West  secured  no  new 
varieties  of  food  that  were  not  available  on  the  Atlantic 
seaboard.  They  did,  however,  enormously  increase  the 
quantity  of  a  few  standard  foods,  such  as  wheat,  corn, 
beef,  and  pork. 

The  ability  or  the  willingness  to  migrate  to  new  areas 
temporarily,  at  least,  relieves  the  stress  of  population. 
Where  the  people  are  either  unwilling  or  unable  to  mi- 
grate, they  have  two  alternatives.  One  is  a  reduction  of 
the  birth  rate;  the  other  is  overpopulation.  So  impor- 
tant is  this  question  of  migration  that  we  may  say  that 
there  are  two  distinct  types  of  civilization,  which  we  may 
call  the  pent-up  and  the  expanding. 

Types  of  Civilization 

[Birth  Control      [Responsible  parenthood  (^^^''^^^^J 

P^"t-"P(overpopulation  L     ,  •  ^       ^      ^ 

^         ^  ^  [Contraceptive  practices 

„  J.         /Migrating  to  new  lands 

Expanding    <  t-.      i     •  i    .. 

\Developing  new  markets 

The  expanding  type  of  civilization  requires  either  emi- 


^  See  Simon  N.  Patten,  Essays  in  Economic  Theory   (New  York,  I924)> 
p.  270. 


292 


THIS  ECONOMIC  WORLD 


gration  to  new  land  or  the  development  of  new  markets 
by  means  of  which  food  and  raw  materials  are  brought 
from  wide  areas  and  finished  products  are  sold  back  in  re- 
turn to  the  inhabitants  of  those  wide  areas.  The  pent-up 
type  of  civilization  is  found  either  in  those  European 
countries  where  birth  control  is  carried  on  to  such  an  ex- 
tent as  to  maintain  a  stationary  population  or  in  those 
Oriental  countries  where  population  has  grown  so  dense 
as  to  make  it  difficult  to  feed  the  increasing  numbers. 
Examples  of  the  expanding  type  are  found  in  England, 
Belgium,  and  the  Netherlands,  which  countries  merely 
expand  their  markets,  as  well  as  in  the  United  States  and 
Canada,  where  the  people  expand  their  tillable  area.  In 
this  country,  for  example,  down  to  about  1900  we  were 
expanding  our  farm  land  more  rapidly  even  than  we  were 


Percentaqe 


1  1  0 

1860=  1  OC 

,j^Crops 

»00 

^••^ 



90 

%. 

\ 

*— Animal 

Jni  rs 

BO 

x. 

■"•-.., 

70 

'•• 

>>. 

^•v 

■  ^^^ 

60 

—  Pasture 

^0 

ForesT  — ' 

*"">C- 

40 

""••Jjjj»^ 

1880 


I690  1000 


1910 


1920 


From  United  States  Department  of  Agriculture,  Year-book,  1923,  p.  72. 

Figure  i :  Trend  in  per  capita  acreage  of  crops,  pasture,  and  forest  and 
in   amount   of   live   stock,    United   States,    1880-1920. 


THE  POPULATION  PROBLEM  293 

expanding  our  population.  The  diagram  in  Figure  i 
shows  how  the  acres  of  crops  per  capita  in  the  United 
States  increased  between  1880  and  1900  and  then  de- 
creased afterward. 

It  is  significant  to  note  that  about  1900,  when  the  area 
per  capita  began  to  decrease,  or,  in  other  words,  when 
the  total  population  began  to  increase  more  rapidly  than 
the  total  acreage  in  crops,  was  the  time  when  we  first 
began  to  hear  about  the  rising  cost  of  living.  In  short, 
the  population  was  beginning  to  catch  up  with  the  expand- 
ing acreage.  Agriculture  was  beginning  to  pay,  and  con- 
tinued to  do  so  until  the  great  slump  following  the  World 
War.  The  impoverishment  of  our  best  customers  for 
agricultural  products  created  another  agricultural  depres- 
sion which  will  probably  be  automatically  relieved  as  soon 
as  our  foreign  customers  regain  their  former  prosperity. 

The  general  retardation  In  the  rate  of  the  expansion  of 
farm  acreage  has  brought  the  Malthusian  principle  of 
population  again  into  prominence.  A  number  of  books 
have  been  written  in  recent  years  restating  the  formula  of 
Malthus  and  calling  attention  again  to  the  danger  of  an 
ultimate  shortage  of  food.  Students  of  agriculture,  how- 
ever, are  not  convinced  that  there  is  any  immediate  pros- 
pect of  such  a  shortage.  It  is  probably  correct  to  say  that 
the  only  food  problem  which  this  country  will  be  called 
upon  to  face  during  the  next  century  will  be  where  to 
find  consumers  for  the  surplus  food  which  our  farmers 
will  be  able  to  grow. 

It  must  be  remembered  that  very  few  of  the  agricul- 
tural improvements  of  the  past  have  enabled  anybody  to 


294  THIS  ECONOMIC  WORLD 

grow  more  food  on  an  acre  of  land.  They  have  been  de- 
signed rather  to  enable  one  man  to  work  more  land.  We 
have  increased  our  food  supply  by  increasing  our  acreage 
rather  than  by  increasing  the  productivity  of  the  soil. 
When  new  areas  of  land  are  no  longer  available  and  acre- 
age begins  to  run  short,  there  is  a  vast  field  for  the  in- 
ventor who  will  be  called  upon  to  solve  the  problem,  not 
of  how  one  man  may  cultivate  more  acres  but  of  how 
each  acre  may  be  made  to  produce  more  food. 

Of  course,  an  acre  of  land  may  be  made  to  produce 
more  food  by  the  simple  device  of  putting  more  work  on 
it,  but  the  effect  of  that  method  is  invariably  to  reduce 
the  product  per  man  and  to  impoverish  the  worker  on  the 
land.  This  is  not  desirable  and,  what  is  more  to  the 
point,  it  is  something  to  which  our  American  farm  labor- 
ers will  not  submit.  If  we  are  ever  to  increase  the  product 
per  acre  in  this  country,  it  must  be  by  some  other  method; 
that  is,  by  the  use  of  better  tools,  more  power,  and  a 
wider  use  of  fertilizers.  This  will  be  done  promptly 
whenever  the  price  of  agricultural  products  will  justify 
it.  Even  the  slightest  tendency  toward  a  scarcity  of  food 
will  be  reflected  in  advancing  prices  for  farm  products, 
and  this  will  be  a  sufficient  stimulus  to  induce  our  farmers 
to  grow  more  per  acre.  The  question  of  food  for  the  gen- 
eral population  is  destined  to  take  care  of  itself  automat- 
ically without  any  worry  on  our  part.  The  only  ques- 
tion on  which  anyone  needs  to  worry  is,  as  I  said  before, 
where  to  find  buyers  for  it  at  prices  that  will  remunerate 
the  farmer. 

However,  that  is  not  in  any  way  a  refutation  of  Mai- 


THE  POPULATION  PROBLEM  295 

thus  or  an  assertion  that  the  time  will  never  come  when 
the  problem  of  food  may  become  an  acute  one.  So  far 
as  these  ultimate  problems  are  concerned,  every  economist 
is,  as  a  matter  of  course,  a  Malthusian  of  one  kind  or 
another.  He  could  not  be  otherwise  If  he  once  understood 
Malthus. 

One  great  source  of  misunderstanding  is  the  failure  to 
distinguish  between  the  results  of  a  more  and  more  in- 
tensive cultivation  of  land  in  a  given  state  of  knowledge 
and  the  results  of  increasing  knowledge  over  periods  of 
time.  In  order  to  make  this  distinction  perfectly  clear, 
the  series  of  diagrams  in  Figure  2  may  be  useful. 

Graphs  I,  II,  III,  and  IV  illustrate  what  is  known  as 
the  tendency  toward  diminishing  returns  at  a  given  time, 
which,  of  course,  means  a  given  state  of  knowledge.  Let 
us  suppose  that  in  Graph  I  the  results  of  intensive  cultiva- 
tion in  a  given  year,  1920,  are  shown.  Along  the  hne  OX 
are  represented  the  number  of  units  of  labor  and  capital 
used  in  the  cultivation  of  a  given  area  of  land.  Along  the 
line  OY  are  represented  the  returns  from  the  application 
of  different  quantities  of  labor  and  capital.  The  curve 
ABB'  represents  the  tendency  toward  diminishing  returns. 
When,  according  to  these  assumptions,  the  number  of 
units  of  labor  and  capital  is  represented  by  the  line  00^ 
the  marginal  product  is  represented  by  the  line  BC. 

In  a  precisely  similar  way,  with  the  same  assumptions, 
let  us  use  graphs  II,  III,  and  IV  to  represent  the  same 
things  with  respect  to  each  of  the  years  1930,  1940,  and 
1950.  During  each  interval  there  is  assumed  to  have  oc- 
curred some  improvements  in  the  knowledge  and  tech- 


296 


THIS  ECONOMIC  WORLD 


X 

I 

Y. 

n 

A 

^ 

A 

>,•■ 

0 

I\b- 

-X 

n 

If    . 

1920 

c 

,930  --•             " 

Y 

HI 

Y 

Al . 

n? 

A 

>^ 

^- 

0 

1  1^ 

-X 

0 

r .. 

1940 

c  c 

1950        ^      ^' 

V 

B^ 

Y, 

R'                       

B" 

I 

I 

(j 

C 

C" 

C"^^ 

1920 

1930 

1940 

1950 

Figure   2 :   Graphical   representation   of   diminishing   returns   for   different 
states    of    agricultural    knowledge. 

nique  of  farming.     This  is  shown  by  the  fact  that  the 
curve  ABB'  is  higher  in  each  successive  decade. 

These  improvements  may  produce  one  of  the  following 
results  :  First,  a  much  larger  number  of  units  of  labor  and 
capital  could  be  used  in  each  decade  on  the  same  area 
without  lowering  the  marginal  product;  or  second,  the 
same  number  of  units  could  be  employed  in  each  decade 
on  the  same  area  and  produce  a  much  larger  marginal 
product;  or  .third,  a  slightly  larger  number  of  units  of 


THE  POPULATION  PROBLEM  297 

labor  and  capital  might  be  employed  and  produce  a 
slightly  larger  marginal  product. 

Taking  the  third  of  these  possibilities  as  the  one  which 
actually  happens,  we  could  represent  the  results  of  im- 
provements in  the  knowledge  and  technique  of  agriculture 
by  means  of  Graph  V.  In  this  diagram,  the  line  BO  is 
identical  in  length  with  the  line  BC  in  Graph  I  and  repre- 
sents the  marginal  productivity  of  labor  and  capital  on 
land  in  the  year  1920.  Line  B'C  m  Graph  V  is  identical 
in  length  with  line  BC  in  Graph  II,  line  B"C"  in  Graph  V 
with  BC  in  Graph  III,  and  B"'C"  in  V  with  BC  in  IV. 
The  curve  BB'B"B"'  in  Graph  V  thus  represents  the  as- 
sumed rate  of  progress  in  well-being,  in  so  far  as  this  de- 
pends upon  the  marginal  product,  during  the  thirty-year 
period.  This  rate  of  progress  in  no  way  offsets  or  contra- 
dicts the  law  of  diminishing  returns.  This  law  is  not  a 
statement  of  historical  trends,  but  of  the  way  land  re- 
sponds at  any  given  time  to  different  applications  of  labor 
and  capital. 

However,  there  is  need  for  a  further  refining  of  the 
Malthusian  theory,  or  bringing  to  the  front  certain  special 
considerations  that  are  not  sufficiently  emphasized  when 
that  theory  is  stated  in  its  cruder  form.  The  Malthusian 
doctrine  concerns  itself  with  the  possibility  of  general 
overpopulation.  There  is  a  more  refined  form  of  Mal- 
thusianism,  however,  which  concerns  Itself  with  the  more 
immediate  problem  of  congestion.  General  overpopula- 
tion must,  of  course,  be  considered  as  a  future  possibility 
unless  rational  checks  are  enabled  to  function  as  limiting 
factors  in  the  rate  of  increase.     But  in  the  western  world 


298  THIS  ECONOMIC  WORLD 

at  least,  the  one  phase  of  the  population  question  that 
need  cause  anxiety  In  the  near  future  is  the  question  of 
congestion. 

Congestion  of  population  Is  of  two  forms,  local  and  oc- 
cupational. Local  or  territorial  congestion  Is  so  easily 
solved  In  these  days  of  effective  transportation  as  to  re- 
quire no  serious  study.  The  problem  of  occupational  con- 
gestion, however,  is  not  so  easily  solved. 

Before  the  days  of  minute  division  of  labor,  the  differ- 
ence between  occupational  congestion  and  general  over- 
population would  not  be  very  great.  In  every  advanced 
industrial  system,  however,  the  division  of  labor  has  been 
carried  so  far  and  different  occupational  groups  are  so  de- 
pendent upon  one  another  as  to  create  a  wide  difference 
between  occupational  congestion  and  general  overpopula- 
tion. If,  to  take  an  extreme  example,  there  should  be  In 
any  locality  more  hodcarriers  than  are  needed  to  work 
with  the  existing  number  of  masons,  that  part  of  the 
world  Is,  for  the  time  being,  overpopulated  with  hod- 
carriers.  Hodcarriers  will  be  just  as  badly  off  in  that 
situation  as  they  would  be  if  there  was  general  overpopu- 
lation throughout  the  entire  world.  However,  in  that 
situation  the  overpopulation  of  hodcarriers  could  be  re- 
lieved in  either  of  two  ways:  first,  by  a  decrease  in  the 
number  of  hodcarriers;  second,  by  an  Increase  in  the  num- 
ber of  masons  and  others  who  are  required  to  balance  the 
oversupply  of  hodcarriers.  In  this  latter  case,  the  over- 
population of  hodcarriers  would  be  relieved  by  an  in- 
crease in  the  total  population,  provided  this  increase  took 
place  in  other  occupations  than  that  of  the  hodcarrier.     It 


THE  POPULATION  PROBLEM  299 

may  sound  a  little  paradoxical,  but  in  reality  it  is  not,  to 
say  that  this  special  phase  of  overpopulation  is  relieved  by 
a  net  increase  in  the  total  population.  What  is  said  about 
the  possible  overpopulation  of  a  portion  of  the  world 
called  hodcarriers  can  be  repeated  with  respect  to  any 
other  specialized  occupation.  It  may  even  be  true  of  a 
considerable  number  of  occupations. 

We  had  in  this  country  a  congestion  of  all  agricultural 
occupations  during  the  seventies,  eighties,  and  early  nine- 
ties of  the  last  century.  The  Homestead  Law,  giving  free 
land  to  actual  settlers,  the  building  of  transcontinental 
railroads  in  advance  of  settlement,  the  rapid  development 
of  farm  machinery,  the  roller  process  of  manufacturing 
flour,  and  the  rising  tide  of  European  immigration,  all 
combined  to  cause  an  overdevelopment  of  agriculture. 
Western  America  was  overpopulated  with  farmers  who 
were  growing  too  much  agricultural  produce.  The  farm- 
ers were  just  as  badly  off  as  they  would  have  been  if  the 
whole  world  had  been  generally  overpopulated  with  all 
kinds  of  people.  For  that  situation  there  were  only  two 
possible  cures.  One  was  to  thin  out  the  farmers.  The 
other  was  to  wait  until  the  rest  of  the  population  increased 
sufficiently  to  balance  the  excessive  number  of  farmers.  In 
short,  that  form  of  overpopulation  was  to  be  cured  by  an 
increase  in  the  total  population,  provided  that  Increase 
took  place  in  the  consuming  centers  rather  than  in  the 
fields  of  agricultural  production. 

A  similar  situation  exists  In  the  coal  mines  of  the 
United  States  at  the  present  time.  There  are  more  coal 
miners  than  are  needed  to  supply  coal  for  the  rest  of  the 


300  THIS  ECONOMIC  WORLD 

population.  The  result  is  they  cannot  all  be  employed 
continuously.  Being  employed  only  a  fraction  of  the  year, 
their  annual  earnings  are  low  In  spite  of  the  fact  that  their 
wages  per  day  or  per  piece  are  high.  Again,  there  are 
two  cures  for  that  situation.  One  would  be  to  thin  out 
the  coal  miners;  the  other  would  be  to  wait  until  the  rest 
of  the  population  increased  sufficiently  to  use  enough  coal 
to  keep  the  existing  number  of  miners  occupied  most  of 
the  year.  In  short,  that  phase  of  overpopulation  which 
we  have  called  occupational  congestion  in  the  coal  mines 
can  be  relieved  by  an  increase  in  the  total  population,  pro- 
vided that  increase  takes  place  outside  of  the  mining  com- 
munities. 

Even  in  older  countries,  where  population  is  much  more 
dense  than  it  is  in  this  country,  the  same  observation  holds 
true.  In  a  country  where  there  is  a  great  deal  of  unem- 
ployment in  the  industrial  centers,  it  looks  to  some  like 
general  overpopulation.  However,  the  unemployment  is 
confined  to  certain  occupational  groups.  The  fact  that 
there  is  a  surplus  of  manual  and  clerical  workers  Indicates 
a  deficit  of  managers  and  enterprisers.  Even  this  appar- 
ent overpopulation,  which  is  really  occupational  conges- 
tion, can  be  relieved  in  two  different  ways,  as  Indicated 
in  the  previous  Illustrations:  that  Is,  manual  workers 
might  be  thinned  out  by  emigration  and  colonization,  or 
they  might  be  employed  at  home  if  more  intelligence  were 
massed  on  the  problems  of  management  and  Industrial  ex- 
pansion, that  is,  If  there  were  larger  numbers  of  highly 
capable  men  massing  their  intelligence  on  these  problems. 
This  would  mean  an  Increase  in  population,  but  the  in- 


THE  POPULATION  PROBLEM  301 

crease  would  take  place  outside  of  those  occupations  that 
are  now  overcrowded  and  in  which  there  is  unemploy- 
ment. If  it  were  possible  for  England  to  Import  ten 
thousand  Henry  Fords,  that  would  constitute  an  Increase 
of  ten  thousand  In  the  total  population,  but  it  would  go  a 
long  way  toward  relieving  the  overpopulation  of  manual 
workers  by  so  expanding  English  Industries  as  to  employ 
every  worker. 

Even  those  countries  that  are  supposed  to  be  acutely 
overpopulated  are  just  the  countries  In  which  the  most 
extreme  luxury  is  found.  The  overcrowding  of  certain  oc- 
cupations automatically  creates  a  deficit  in  certain  other 
occupations.  The  few  who  are  capable  of  functioning  in 
those  occupations  which  are  undercrowded  automatically 
become  exceedingly  rich.  Even  in  these  cases  it  Is  not  be- 
yond all  possibility  that  the  apparent  overpopulation 
could  be  partially  relieved  by  an  Increase  In  the  total  pop- 
ulation, provided  that  increase  took  place  In  those  occupa- 
tions that  are  undercrowded.  This  would  be  true  at  least 
until  the  absolute  scarcity  of  land  became  the  limiting 
factor. 

A  system  of  universal  and  popular  education,  provided 
the  education  Is  not  dilettantic,  would  be  a  very  effective 
method  of  redistributing  the  population  occupationally. 
Such  a  system  of  education  would  make  It  possible  for 
larger  numbers  to  escape  the  Intensely  overcrowded  occu- 
pations and  fit  themselves  for  the  less  crowded.  If  the 
educational  system  were  comprehensive  and  Included  busi- 
ness and  professional  schools  of  a  high  order,  It  would 
tend  to  shift  the  balance  upward  toward  the  professional, 


302  THIS  ECONOMIC  WORLD 

managerial,  and  enterprising  occupations.  This,  to  be 
sure,  would  not  mean  a  general  increase  in  the  total  popu- 
lation. It  would  merely  mean  an  occupational  redistribu- 
tion of  the  population. 

A  net  Increase  In  total  population  that  would  relieve 
the  congestion  at  the  bottom  of  the  economic  scale  might 
take  place  in  one  of  two  ways:  first,  by  the  Immigration 
of  men  of  business  talent  and  training;  second,  by  a  more 
rapid  rate  of  natural  Increase  within  these  classes.  As  a 
matter  of  fact,  there  are  certain  backward  countries  today 
that  are  receiving  Immigrants  of  this  type  from  the  more 
advanced  countries.  Technicians,  business  managers,  and 
enterprisers  are  going  to  some  of  these  backward  coun- 
tries and  helping  to  develop  Industries.  This  automat- 
ically relieves,  to  a  certain  extent,  the  occupational  con- 
gestion at  the  bottom  by  Increasing  the  demand  for  the 
lower  grades  of  labor.  The  other  method  of  increasing 
the  number  of  such  people  is  merely  that  of  breeding 
them.  One  reason  why  such  men  are  scarce  Is  undoubtedly 
the  fact  that  the  rate  of  Increase  among  such  people  Is 
usually  lower  than  the  rate  among  the  people  who  fill  the 
lower  ranks.  A  somewhat  higher  birth  rate  among  the 
more  capable  classes  would  tend  to  increase  the  ratio  of 
men  of  high  capacity  to  those  of  lower  capacity.  A  de- 
crease In  the  birth  rate  among  those  of  low  capacity 
would,  of  course,  affect  the  ratio  in  the  same  way.  The 
aim  of  the  birth  control  movement  is  both  to  Increase  the 
birth  rate  among  the  more  capable  and  to  decrease  it 
among  the  less  capable. 

Economists  have  perhaps  placed  too  much  dependence 


THE  POPULATION  PROBLEM  303 

upon  a  high  standard  of  living  as  a  check  upon  popula- 
tion. As  a  preventive  of  general  overpopulation  it  is  prob- 
ably effective;  but,  as  stated  above,  our  present  concern  is 
not  so  much  with  the  problem  of  general  overpopulation 
as  with  that  of  occupational  congestion.  As  a  preventive 
of  occupational  congestion,  the  standard  of  living  is  not 
universally  effective.  To  begin  with,  rational  foresight  is  a 
factor  in  the  standard  of  living.  Expensive  habits  do  not 
constitute  a  high  standard  of  living  unless  coupled  with 
enough  foresight  to  cause  people  to  postpone  marriage 
and  reduce  the  birth  rate  in  order  to  maintain  those  expen- 
sive habits.  In  the  least  Intelligent  strata  of  society  there  is 
so  little  foresight  as  to  destroy  the  effectiveness  of  expen- 
sive habits  as  a  check  on  the  rate  of  multiplication. 

In  the  extreme  case  of  the  feeble-minded  there  is  prac- 
tically no  foresight  at  all.  In  the  strictly  technical  sense, 
therefore,  there  is  no  real  standard  of  living  among  them. 
They  will  multiply  regardless  of  their  inability  to  sup- 
port children.  Any  country  that  permits  free  multiplica- 
tion among  those  of  low  mentality  will  therefore  always 
have  a  congestion  in  those  occupations  that  can  be  carried 
on  by  persons  of  low  mentality.  Such  people  In  such  a 
country  will  always  be  as  badly  off  as  though  the  whole 
world  were  overpopulated.  The  only  way  of  preventing 
this  is  some  means  of  segregating  such  people  or  other- 
wise preventing  their  free  and  unrestrained  multiplica- 
tion. 

Before  anything  can  be  done  to  remove  the  menace  of 
the  feeble-minded,  we  must  convince  ourselves  that  it  is  a 
real  menace.     Some  people  are  not  convinced.     It  is  serl- 


304  THIS  ECONOMIC  WORLD 

ously  suggested  that  it  may  become  necessary  to  breed 
morons  in  great  abundance  to  do  our  rough  work.  How, 
it  is  argued,  can  we,  the  self-styled  intelligentsia,  live  re- 
fined lives  if  we  have  to  do  our  own  rough  muscular  work? 
In  ancient  civilizations  they  had  slaves,  but  slavery  is  now 
impossible.  In  certain  old  countries  today  they  have 
abundant  supplies  of  cheap  labor — labor  which  is,  all 
things  considered,  cheaper  than  slaves.  In  these  countries 
refined  people  can  have  well  trained  servants  because  well 
trained  servants  are  abundant  and  cheap.  There  are  all 
sorts  of  menial  work  there  which  capable  and  industrious 
men  and  women  are  glad  to  do  for  wages  that  can  be  paid 
by  people  in  moderate  circumstances.  But  in  the  United 
States  it  is  hard  to  find  any  one  to  do  menial  work,  and 
when  such  persons  are  found  they  command  wages  that 
put  them  beyond  the  reach  of  any  except  the  very  rich. 
Therefore,  it  is  argued,  we  must  increase  our  supply  ot 
low-grade,  poorly  paid  labor.  If  we  cannot  import  it  be- 
cause of  our  immigration  laws,  we  must  breed  it. 

To  begin  with,  men  and  women  do  not  exist  in  order 
that  we,  the  self-styled  intelligentsia,  may  have  cheap 
help.  In  the  next  place,  we  are  not  the  inventive  race 
that  we  pride  ourselves  upon  being  if  we  cannot  invent 
machines  to  do  what  we  do  not  like  to  do  for  ourselves  or 
cannot  hire  others  to  do  for  us.  The  machine  is  for  us 
what  slaves  were  for  ancient  civilizations  and  what  cheap 
labor  is  for  the  lower  civilizations  of  the  present  time. 

One  penalty  we  must  pay  for  this  policy  of  substituting 
machines  for  slaves  is  that  we  very  soon  become  depend- 
ent upon  machines  in  precisely  the  same  sense  that  the 


THE  POPULATION  PROBLEM  305 

slave  owners  became  dependent  upon  their  slaves  and  that 
the  leisure  classes  in  old  countries  are  dependent  upon 
trains  of  cheap  but  efficient  servants.  This  dependence 
upon  machines  is  a  penalty  that  must  be  faced,  but  it 
should  be  faced  intelligently  by  recognizing  it  for  what  it 
is.  It  only  confuses  the  problem  to  say,  as  some  are  say- 
ing, that  if  we  are  dependent  upon  machines  we  become 
slaves  of  the  machines.  According  to  that  form  of  per- 
verted logic,  the  slave  owners  were  really  the  slaves  and 
the  slaves  the  masters,  because  (  1)  the  owners  became 
dependent  upon  their  slaves. 

If  productivity  is  increased  by  machine  production,  then 
the  country  that  develops  its  productive  machinery  will 
either  support  more  people  on  the  same  scale  of  consump- 
tion or  the  same  number  of  people  on  a  more  lavish  scale 
of  consumption  than  is  possible  for  a  country  that  sticks 
to  hand  methods.  After  once  making  that  choice,  there  is 
a  severe  penalty  for  a  return  to  hand  methods.  Either  the 
population  must  be  thinned  out,  or  it  must  accept  a  lower 
or  less  expensive  standard  of  living.  No  people  has  ever 
willingly  accepted  either  alternative.  Therefore  we,  who 
are  machine-using  people,  must  go  on  using  more  and  more 
machinery  unless  we  are  willing  to  face  a  thinning  out  of 
our  population,  or  a  lowering  of  our  standard  of  living. 
The  thinning  out  of  the  population  could  take  place  only 
in  three  ways,  a  decrease  in  the  birth  rate,  an  increase  in 
the  death  rate,  or  emigration.  The  lowering  of  the  stand- 
ard of  living  might  take  the  form  of  giving  up  some  of 
our  leisure,  by  working  longer  hours  or  having  fewer  holi- 
days, or  of  giving  up  some  of  those  goods  and  creature 


3o6  THIS  ECONOMIC  WORLD 

comforts  that  machine  production  now  enables  us  to  enjoy. 

During  the  greater  part  of  human  history  the  standard 
of  living  has  been  so  low  for  the  masses  as  to  make  it  im- 
possible to  reduce  it  very  much.  Consequently,  any  de- 
cline in  the  productivity  of  industry  has  generally  meant  a 
thinning  out  of  the  population  in  one  of  the  three  ways 
mentioned  above.  There  has,  therefore,  always  been  a 
powerful  reason  against  giving  up  a  more  productive  in 
favor  of  a  less  productive  method.  The  population  ques- 
tion supplied  the  reason. 

Herding,  for  example,  is  a  more  productive  method  of 
using  land  than  hunting,  and  plowing  a  more  productive 
method  than  herding.  Any  tribe  that  has  once  made  the 
transition  from  hunting  to  herding,  or  from  herding  to 
plowing,  is  not  likely  to  relapse  unless  forced  by  military 
conquest  to  do  so.  Neither  is  any  nation  that  has  once 
made  the  transition  from  hand  work  to  machine  work 
likely  to  relapse  voluntarily  into  a  less  productive  indus- 
trial system.    The  penalties  are  too  severe. 

However,  from  the  non-economic  point  of  view,  there 
is  always  a  great  deal  to  be  said  against  the  advance  to  a 
more  productive  or  in  favor  of  a  return  to  the  less  pro- 
ductive system.  Cain,  for  example,  according  to  the  old 
story,  was  a  plowman  while  Abel  was  a  herdsman.  The 
business  of  plowing  literally  kills  the  business  of  herding, 
and,  figuratively,  the  plowman  may  be  said  to  kill  the 
herdsman.  There  is  no  help  for  it,  and  there  is  no  return 
to  herding  except  by  paying  the  penalty  of  migrating  to 
new  pastures,  which  usually  means  the  extermination  of 
their  occupan.ts,  or  of  thinning  out  the  population,  usually 


THE  POPULATION  PROBLEM  307 

by  increasing  the  death  rate.  The  population  question, 
again,  supplies  the  reason. 

Yet  the  uneconomic  minds,  or  those  minds  which  prize 
mellow  tradition,  the  ancient  ways,  the  old-time  religion, 
the  world  as  God  made  it,  pretty  generally  revolt  against 
this  change  from  the  less  to  the  more  productive  methods. 
They  refuse  to  call  it  progress  and  can  always  find  reasons 
against  it,  or  in  favor  of  a  return,  which  to  them  are  satis- 
factory. The  writer  of  the  story  of  Cain  and  Abel  was 
evidently  of  that  mind,  as  are  also  those  who  are  today 
urging  a  return  to  the  handicraft  stage  of  industry.  How- 
ever, the  law  of  population  is  against  them.  It  is  no 
wonder  that  they  dislike  to  hear  it  mentioned. 

Machines  enable  us  to  live  in  large  numbers  and  also  to 
live  well  and  even  elegantly  without  either  slaves  or  cheap 
labor.  However,  our  ideas  as  to  what  it  means  to  live 
elegantly  must  undergo  a  change.  So  long  as  we  try  to 
follow  those  standards  of  elegance  that  were  set  for  us 
by  people  who  had  either  slaves  or  cheap  servants  to  look 
after  and  wait  upon  them,  we  shall  be  at  a  disadvantage. 
An  intellectual  and  esthetic  revolution  must  accompany 
the  industrial  revolution  that  was  and  is  still  being 
brought  about  by  power-driven  machinery. 

Our  ideas  as  to  what  refinement  and  elegance  mean  are 
very  largely  traditional.  When  our  traditions  on  such 
matters  were  formed,  machines  played  a  very  small  part 
in  the  lives  of  our  ancestors.  Cheap  labor  enabled  the 
few  to  avoid  rough  work  and  live  lives  that  they  chose  to 
call  refined  and  elegant.  But  for  those  cheap  laborers 
there  was  not  much  of  either  refinement  or  elegance,  as 


3o8  THIS  ECONOMIC  WORLD 

the  aristocratic  few  understood  such  terms.  It  is  quite 
possible  to  create  new  traditions  and  conventions  as  to  the 
meaning  of  such  terms,  based  on  machine  production. 
When  this  is  done,  we  shall  have  refinement  and  elegance 
quite  as  satisfying  as  any  that  any  previous  age  enjoyed, 
and  it  will  have  the  incalculable  advantage  of  being  within 
the  reach  of  all.  Machinery  will  make  it  unnecessary  to 
condemn  the  many  to  squalor  and  hard  muscular  work  in 
order  that  the  few  may  cultivate  the  graces  of  polite 
society. 

The  problem  of  the  occupational  redistribution  of  the 
population  is  not  altogether  a  matter  of  education.  It  is 
partly  a  matter  of  breeding  and  heredity.  So  far  as  any 
existing  generation  is  concerned.  Its  heredity  is,  of  course, 
already  determined.  Since  that  factor  cannot  be  changed 
in  a  generation  that  is  already  born,  the  only  thing  to  do 
Is  to  educate  it  or  at  least  to  improve  its  environment,  and 
education  Is  the  most  positive  and  effective  method  now 
known  for  improving  the  environment  of  a  growing  gen- 
eration. But  when  we  are  considering  the  future  of  so- 
ciety we  must  consider  the  heredity  of  unborn  generations 
as  well  as  their  environment. 

One  fundamental  difficulty  which  in  Itself  Is  enough  to 
menace  our  civilization,  or  at  least  to  cast  some  doubt 
upon  the  possibility  of  its  permanence,  is  the  differential 
birth  rate.  In  so  far  as  it  is  true  that  those  who  are  able 
to  fit  themselves  into  our  civilization  and  to  make  such 
contributions  to  it  as  to  win  distinction  for  themselves  are 
failing  to  multiply  or  to  leave  patterns  of  themselves,  so 
far  does  that  tend  to  deplete  the  supply  of  men  of  high 


THE  POPULATION  PROBLEM  309 

capacity.  Again,  in  so  far  as  those  who  fail  to  do  more 
than  work  under  direction  and  who  make  a  rather  poor 
living  at  that  multiply  at  an  inordinate  rate,  just  so  far 
does  this  tends  to  increase  the  numbers  of  that  kind  of 
people.  If  these  two  tendencies  are  found  working  in 
combination  in  our  civilization,  it  is  a  foregone  conclusion 
that  our  civilization  will  run  Its  course  and  decline,  as 
others  have  done.  When  the  time  comes,  if  it  ever  does, 
when  our  population  Is  made  up  of  those  who  lack  initia- 
tive and  creative  power  and  who  must,  therefore,  work 
under  the  direction  of  others,  and  when  there  are  too  few 
others  with  initiative  and  creative  power  to  direct  the  Inert 
mass,  then  our  civilization  will  be  at  an  end. 

There  is  ample  evidence,  from  a  variety  of  sources, 
that  those  who  possess  social  adaptability  in  the  form  of 
initiative  and  creative  capacity  are  not  reproducing  their 
kind  at  the  same  rate  as  those  who  show  no  capacity  for 
anything  except  that  of  working  under  direction.  It  is 
also  to  be  feared  that  with  our  amazing  prosperity  and 
the  extent  to  which  philanthropy  has  extended  Itself,  we 
are  lending  some  encouragement  to  an  over-rapid  multi- 
plication among  those  of  low  capacity.  Whatever  the 
facts  may  be,  the  possibilities  In  this  direction  are  some- 
what alarming.  This  may  be  made  clear  by  a  study  of 
the  curve  in  Figure  3. 

If  In  a  given  population  we  can  find  some  way  of  meas- 
uring capacity  and  Indicating  It  on  the  line  OY,  while  we 
indicate  the  numbers  along  the  line  OX,  we  may  assume 
that  a  normal  distribution  of  capacity  might  be  repre- 
sented by  the  solid  curve  ABC.    If  the  conditions  of  life 


3IO 


THIS  ECONOMIC  WORLD 


Figure  3:  Graphic  representation  of  the  differential  birth  rate  in  capacity 
and   in   lack  of   capacity. 

were  exceedingly  hard  so  that  the  lower  levels  of  capacity 
were  cut  off  by  starvation,  hardship,  or  the  inroads  of 
enemies,  the  number  of  weaklings  might  be  so  reduced  as 
to  be  represented  by  the  line  OC  instead  of  0C\  in  which 
case  the  distribution  of  capacity  would  be  represented  by 
the  curve  JBC  instead  of  ABC.  However,  if  conditions 
are  made  abnormally  easy  and  the  more  capable  are  com- 
pelled to  support  the  incapables  who  would  otherwise 
perish,  while  medical  and  other  devices  are  found  which 
enable  those  of  naturally  very  low  capacity  to  multiply 
and  reproduce  their  kind,  the  total  number  living  might  be 
extended  to  C",  and  the  curve  of  the  distribution  of  ca- 


THE  POPULATION  PROBLEM  311 

pacity  would  be  then  represented  by  the  dotted  curve 
ABC".  In  addition  to  this  it  might  happen  that  through 
social  and  other  reasons  the  rate  of  increase  among  the 
more  capable  should  be  abnormally  reduced.  This  could 
be  represented  by  an  appreciable  sagging  in  the  curve,  as 
indicated  in  the  dotted  line  ADB,  in  which  case  the  gen- 
eral curve  of  the  distribution  of  capacity  or  social  adapta- 
bility would  be  represented  by  the  dotted  curve  ADB'C", 

Where  this  is  found  to  be  the  case,  the  prediction  could 
be  made  with  a  good  deal  of  certainty  that,  sooner  or 
later,  the  great  inert  mass  who  have  to  be  directed  would 
be  so  numerous  and  those  with  the  creative  capacity  to 
direct  them  so  few  as  to  make  it  impossible  to  organize 
and  direct  the  energies  of  the  people  in  such  ways  as  to 
maintain  a  high  standard  of  civilization.  A  certain  bal- 
ance of  energy,  similar  to  that  which  exists  among  plants 
and  animals,  would  result,  and  this  would  mean  the  end 
of  that  particular  civilization. 

In  order  to  avert  such  a  calamity  where  it  is  found  to 
be  imminent,  something  must  be  done  to  flatten  out  the 
curve  or  to  bring  the  curve  back  to  something  near  its 
normal  shape.  This  can  be  done  only  by  reducing  the  rate 
of  multiplication  among  those  near  the  right  end  of  the 
curve  and  by  increasing  the  rate  among  those  at  the  left 
end  of  the  curve.  Physical  sterility,  of  course,  cuts  off 
the  lowest  grades  of  degenerates  in  spite  of  all  that  un- 
wise philanthropy  can  do  to  increase  their  number.  Above 
the  level  of  physical  sterility  something  must  be  found  to 
reduce  the  rate  of  multiplication.  Several  agencies  are 
already  at  work  and  they  may  be  made  much  more  effec- 


312  THIS  ECONOMIC  WORLD 

tlve.  First,  we  have  the  criminal  law,  under  which  the 
lowest  grades  of  criminals  are  either  executed  or  segre- 
gated. Even  imprisonment  results  in  their  complete  or 
partial  sterilization,  especially  if  they  are  imprisoned  for 
long  periods  of  time.  Next  is  the  segregation  or  steriliza- 
tion of  paupers  of  breeding  age.  This  also  has  some 
effect  in  reducing  the  numbers  born  with  low  capacity. 
Building  regulations  and  other  devices  to  increase  the  cost 
of  living  to  the  poorer  classes  will  automatically  force  in- 
creasing numbers  into  the  pauper  class.  One  of  the  most 
effective  devices  is  a  rigid  minimum  wage  law.  If  no  one 
should  be  permitted,  under  any  circumstances,  to  work  for 
less  than  five  dollars  a  day,  it  would  undoubtedly  reduce 
the  rate,  or  increase  the  age,  of  marriage  among  the  less 
economically  capable.  The  man  who  could  not  get  a  job 
at  all  would  automatically  become  a  pauper  and  be  thus 
prevented  from  marrying.  Those  that  were  capable  of 
earning  five  dollars  a  day  would  then  have  somewhat  bet- 
ter conditions  under  which  to  bring  up  their  families. 

Each  of  these  methods  may  be  made  more  effective 
than  they  now  are  as  a  means  of  reducing  the  rate  of  mul- 
tiplication among  people  of  low  capacity.  In  the  applica- 
tion of  criminal  law  it  is  especially  important  that  the  or- 
dinary low-grade  criminal  should  be  somewhat  more  dras- 
tically dealt  with  than  at  present.  The  lowest  types  are 
not  those  that  commit  what  are  commonly  called  the 
gravest  crimes.  They  are  the  recidivists  who  repeatedly 
commit  petty  crimes.  In  fact,  the  inmates  of  our  Federal 
prisons  who  are  there  for  the  graver  offenses  prohibited 
by  Federal  law  show  a  fairly  high  average  of  intelligence. 


THE  POPULATION  PROBLEM  313 

The  criminals  who  come  up  regularly  before  the  police 
courts  for  petty  stealing,  drunkenness,  and  general  dis- 
order and  who  are,  as  a  rule,  dealt  with  very  leniently 
and  therefore  permitted  to  multiply  without  much  inter- 
ference are  the  ones  who,  in  the  interests  of  eugenics, 
should  be  effectively  prevented  from  multiplication.  If 
our  entire  administration,  not  only  of  criminal  law  but  of 
poor  relief,  and  if  our  labor  legislation  were  all  made 
more  drastic,  they  would  tend  more  and  more  to  thin  out 
the  low  grades  of  intelligence  or  economic  adaptability 
and,  to  that  extent  at  least,  raise  the  general  average. 

However,  none  of  these  devices  would  affect  the  sag 
ADB  at  the  left  end  of  the  curve.  It  is  difficult  to  see  how 
any  positive  or  direct  legislation  could  have  much  effect 
on  this  problem.  If,  as  some  believe,  the  sag  is  entirely 
due  to  the  sterilizing  effect  of  mental  activity,  this  would 
seem  to  be  a  matter  of  physiology  upon  which  social  con- 
trol can  have  no  appreciable  effect.  If,  on  the  other  hand, 
as  some  believe,  this  is  largely  a  matter  of  social  habit  or 
convention,  the  problem  may  be  difficult  but  it  is  not  phys- 
ically impossible  of  solution.  Social  standards  and  habits 
are  capable  of  change,  even  though  it  is  difficult  to  find 
ways  of  changing  them. 

One  apparent  reason  for  the  low  rate  of  multiplication 
among  intellectual  workers  is  the  fact  that  with  most  of 
them  their  one  absorbing  ambition  is  an  intellectual  ca- 
reer. Until  that  ambition  shows  signs  of  being  realized, 
they  have  not  time  or  inclination  to  think  of  anything  else. 
But  it  is  not  beyond  the  possibilities  of  a  constructive  im- 
agination to  picture  a  society  in  which  the  highest  ambi- 


314  THIS  ECONOMIC  WORLD 

tion  of  every  person  capable  of  harboring  an  overpower- 
ing ambition  would  be  to  found  a  noble  family  or  to  per- 
petuate a  family  already  honorably  and  nobly  founded. 
In  such  a  society,  with  such  ideals,  business,  professions, 
and  arts  would  take  second  place.  These  careers  would 
be  pursued  not  for  their  own  sakes  but  for  the  purpose  of 
realizing  the  main  ambition — that  of  family-building. 

Another  reason  for  this  sagging  (one  much  less  diffi- 
cult to  deal  with)  is  that  in  the  most  intellectual  occupa- 
tions the  man's  earning  power  in  the  early  years  of  life  is 
practically  nil.  He  does  not  begin  to  earn  enough  to  sup- 
port a  family  until  near  middle  life,  and  that  leaves  com- 
paratively few  years  in  which  to  achieve  a  family.  A 
very  moderate  amount  of  financial  rearrangement  could 
solve  this  problem.  On  this  point  Francis  Galton  made, 
more  than  a  generation  ago,  the  following  profound 
observations: 

The  long  period  of  the  Dark  Ages  under  which  Europe  has  lain 
is  due,  I  believe,  in  a  very  considerable  degree  to  the  celibacy  en- 
joined by  religious  orders  on  their  votaries.  Whenever  a  man  or 
woman  was  possessed  of  a  gentle  nature  that  fitted  him  or  her  to 
deeds  of  charity,  to  meditation,  to  literature,  or  to  art,  the  social 
condition  of  the  time  was  such  that  they  had  no  refuge  elsewhere 
than  in  the  bosom  of  the  church.  But  the  church  chose  to  preach 
and  exact  celibacy.  The  consequence  was  that  these  gentle  natures 
had  no  continuance,  and  thus,  by  a  policy  so  singularly  unwise  and 
suicidal  that  I  am  hardly  able  to  speak  of  it  without  impatience, 
the  church  brutalized  the  breed  of  our  forefathers.  She  acted 
precisely  as  if  she  had  aimed  at  selecting  the  rudest  portion  of  the 
community  to  be,  alone,  the  parents  of  future  generations.  She 
practiced  the  arts  which  breeders  would  use  who  aimed  at  creating 
ferocious,  currish,  and  stupid  natures.  No  wonder  that  club  law 
prevailed  for  centuries  over  Europe;  the  wonder  rather  is  that 


THE  POPULATION  PROBLEM  315 

enough  good  remained  in  the  veins  of  Europeans  to  enable  their 
race  to  rise  to  its  present  very  moderate  level  of  natural  morality. 
A  relic  of  this  monastic  spirit  clings  to  our  universities,  who  say 
to  every  man  who  shows  intellectual  powers  of  the  kind  they  de- 
light to  honor,  "Here  is  an  income  of  from  one  to  two  hundred 
pounds  a  year,  with  free  lodging  and  various  advantages  in  the  way 
of  board  and  society;  we  give  it  you  on  account  of  your  ability; 
take  it  and  enjoy  it  all  your  life  if  you  like :  we  exact  no  condition 
to  your  continuing  to  hold  it  but  one,  namely,  that  you  shall  not 
marry."^ 

Until  recently,  the  policy  which  Galton  so  severely  con- 
demned was  pursued  even  by  many  of  our  American  uni- 
versities. A  somewhat  less  narrow  attitude  is  showing 
itself,  but  much  more  might  be  done  in  the  direction  of 
encouraging  the  holders  of  fellowships  and  young  in- 
structors to  marry  rather  than  to  remain  single. 

In  business  and  professional  life  something  might  also 
be  done  to  enable  young  men  to  marry  without  having  to 
wait  until  they  had  achieved  economic  Independence  in 
these  economically  hazardous  occupations.  So  far  as  the 
young  men  and  women  Involved  come  from  well-to-do 
families,  the  families  should  themselves  assume  some  re- 
sponsibility. If  more  men  should  cultivate  what  Victor 
Hugo  called  "the  gentle  art  of  being  a  grandfather,"  even 
if  they  do  nothing  more  than  to  ease  the  economic  burden 
of  young  parents,  a  positive  contribution  to  eugenics 
would  be  made.  It  is  fair  to  say,  however,  that  a  great 
many  middle-aged  and  elderly  people  are  actually  doing 
this.  If  people  should  only  preach  as  well  as  they  prac- 
tice In  this  as  well  as  in  some  other  respects,  it  would  be  a 
much  better  world. 


^  From  Hereditary  Genius,  New  York,  The  Macmillan  Company,  1892. 


X 


THE  SUPPOSED  NECESSITY  FOR  AN 
INDUSTRIAL  RESERVE  ARMY^ 

TWO  distinct  groups  are  in  the  habit  of  insisting  that 
an  industrial  reserve  army,  or  a  normal  surplus  of 
laborers,  is  necessary  to  the  maintenance  of  the  present  in- 
dustrial system.  First,  there  are  certain  employers  of  labor 
who  find  it  very  convenient  to  their  purposes  to  be  able  to 
hire  and  fire,  to  increase  or  decrease  their  labor  force,  ac- 
cording as  business  is  brisk  or  dull.  Some  of  these  are 
doubtless  honestly  unable  to  imagine  how  they  could  do 
business  in  any  other  way,  and  really  think  that  their  busi- 
ness would  be  ruined  if  there  were  no  normal  surplus  of 
laborers  who  might  be  called  in  when  business  was  espe- 
cially active  and  orders  were  coming  in  rapidly,  and  dis- 
charged when  orders  for  new  goods  were  diminishing. 
Consequently,  they  state  almost  as  an  axiom  that  such  a 
labor  reserve  is  essential  to  modern  industry.  Second, 
there  are  certain  enemies  of  the  present  industrial  system 
who  accept  as  true  these  statements  of  the  employers  and 
then  use  them  as  a  basis  for  attacking  the  whole  system 
and  insisting  on  a  new  economic  order.  If,  they  insist, 
the  present  industrial  system  cannot  exist  without  a  nor- 
mal condition  of  unemployment  for  large  numbers  of 

^  See  article  by  T,  N.  Carver  in  the  Journal  of  Social  Forces,  March, 
1926,  which  is  h^re  reproduced  by  permission. 

316 


AN  INDUSTRIAL  RESERVE  ARMY  317 

men,  or  if  it  can  employ  all  laborers  only  in  boom  times, 
then  the  present  industrial  system  is  not  fit  to  exist.  If 
the  original  assumption  were  true,  this  conclusion  would 
probably  be  unassailable.  The  assumption  happens  to  be 
false. 

In  demonstrating  the  falsity  of  that  assumption  it  is 
not  necessary  to  attempt  to  show  that  an  industrial  re- 
serve army  is  not  convenient  to  certain  employers,  or  to 
deny  that  if  there  were  no  industrial  reserve  army  certain 
weak  employers  might  go  to  the  wall  and  others  have 
their  profits  reduced.  But  while  the  employers'  difficulties 
might  be  increased  if  there  were  no  labor  reserve,  the 
superior  intelligence  of  the  surviving  employers  might  be 
able  to  meet  them.  That  is  what  employing  intelligence 
is  for — to  solve  problems  and  meet  difficulties.  This,  of 
course,  only  presents  an  alternative;  but  it  is  something  to 
show  that  there  is  an  alternative,  or  that  it  is  not  a  fore- 
gone conclusion  that  industry  must  cease  to  exist  if  there  is 
no  labor  reserve. 

Not  every  practical  business  man  is  gifted  with  a  con- 
structive imagination.  He  may  be  able  to  solve  problems 
in  detail  when  each  detail  is  presented  as  an  immediate 
difficulty  and  yet  be  unable  to  see  the  problem  as  a  whole, 
much  less  to  see  in  advance  how  he  could  solve  a  whole 
group  of  hypothetical  problems  that  have  not  yet  arisen. 

This  explains  why  so  many  practical  men  in  a  pro- 
tected industry  say  positively  that  they  could  not  do  busi- 
ness at  all  without  a  protective  tariff.  The  removal  of 
the  tariff  would  undoubtedly  create  difficulties  that  might 
eliminate  a  few  of  the  weaker  or  less  well  managed  indus- 


3i8  THIS  ECONOMIC  WORLD 

tries,  but  the  survivors,  being  presumably  better  managed, 
and  being  certainly  relieved  of  the  competition  of  their 
defunct  rivals,  would  find  a  way  to  carry  on.  So  it  is  with 
many  new  difficulties  when  they  arise.  The  restriction  of 
immigration,  shutting  off  large  supplies  of  cheap  labor, 
would,  according  to  some  of  these  short-sighted  prophets, 
completely  destroy  American  Industry.  Not  long  ago  cer- 
tain members  of  a  manufacturers'  association  said  posi- 
tively that  the  textile  industry  of  New  England  required 
at  least  100,000  new  wage  workers  a  year  to  replace  those 
that  were  lost  by  old  age,  death,  and  the  migration  to 
other  industries.  An  air  of  statistical  finality  was  given 
to  the  argument  by  carefully  prepared  and  presumably 
correct  statistical  charts  showing  the  losses  from  these 
three  sources.  Then  I  was  asked  to  give  the  figures  show- 
ing just  where  these  losses  could  be  made  up  If  Immigra- 
tion were  restricted.  And  yet,  the  very  men  who  were 
then  unable  to  see  how  the  problem  could  possibly  be 
solved  have  gone  to  work  as  practical  men  to  solve  It, 
partly  by  paying  wages  that  tended  to  check  the  migration 
to  other  industries,  but  mainly  by  superior  labor-saving 
methods  by  which  the  same  product  can  be  produced  with 
less  labor.  Yet  even  now,  there  are  a  few  self-styled  prac- 
tical men  left,  and  a  few  others  who  pose  as  economists, 
who  insist  that  without  a  large  supply  of  cheap  labor  our 
industries  must  fail  and  our  prosperity  come  to  an  end. 

Even  some  of  the  older  British  economists,  before 
Adam  Smith  put  things  in  a  true  perspective,  were  in  the 
habit  of  looking  at  the  problem  of  national  economy 
wholly  from  the  standpoint  of  the  upper  classes.    Conse- 


AN  INDUSTRIAL  RESERVE  ARMY  319 

quently,  they  fell  into  the  error  of  including  an  abundant 
supply  of  cheap  labor,  along  with  soil,  mines,  and  other 
natural  resources,  among  the  factors  that  made  for  na- 
tional wealth.  Even  today  we  occasionally  hear  a  belated 
voice  proclaiming  that  we  must  have  cheap  labor  to  make 
a  prosperous  nation.  Give  us  immigrants  and  we  will 
give  you  steel,  said  Judge  Gary.  How  can  we  live  a  life 
of  elegant  leisure  without  cheap  and  efficient  servants,  say 
the  esthetes.  All  this  overlooks  the  fact  that  cheap  labor 
means  poverty  Instead  of  riches  for  the  wage  workers 
who,  man  for  man,  must  be  reckoned  as  of  equal  impor- 
tance with  business  and  professional  men,  scholars,  and 
artists.  Undoubtedly  It  would  be  to  the  advantage  of  all 
these  groups,  who  do  not  have  to  compete  with  manual 
workers,  to  have  plenty  of  cheap  labor  to  wait  upon  them 
as  menial  servants,  muscular  workers,  or  mechanics.  But 
precisely  the  same  reasoning  that  leads  to  this  conclusion 
leads  equally  to  the  conclusion  that  it  would  be  a  great  ad- 
vantage to  the  manual  workers  to  have  an  abundant  sup- 
ply of  competent  business  and  professional  men,  doctors, 
artists,  actors,  and  the  like,  all  compelled  by  competition 
to  work  hard  and  efficiently  for  low  profits,  salaries,  or 
fees. 

In  view  of  the  fact  that  business  enterprisers  who  are 
supposed  by  many  to  be  the  very  keystone  of  the  present 
economic  structure,  that  the  leisure  class  who  live  mainly 
on  inherited  wealth  and  are  therefore  the  one  class  which 
would  lose  everything  and  gain  nothing  from  a  change  In 
the  economic  system,  and  that  even  a  few  artists  and 
scholars  who  envy  their  European  and  Asiatic  colleagues 


320  THIS  ECONOMIC  WORLD 

their  cheap  servants  seem  so  generally  to  regard  an  abun- 
dant supply  of  cheap  labor,  which  means  a  mass  of  pov- 
erty, as  a  necessary  factor  in  their  comfortable  existence, 
it  is  not  surprising  that  others  should  accept  this  general 
idea  as  a  fact  and  say,  "Away  with  such  an  economic 
system  1" 

I  should  frankly  agree  with  them  If  I  were  once  con- 
vinced of  their  first  assumption.  A  system  is  not  worthy 
to  last  a  single  week  that  requires  a  mass  of  poverty  or 
unemployment  for  its  continuation.  I  hereby  announce 
myself  as  ready  to  join  a  revolutionary  party  for  the  im- 
mediate overthrow  of  the  present  economic  system  the 
moment  anyone  can  show  even  a  preponderance  of  evi- 
dence in  favor  of  the  proposition  that  both  poverty  and 
unemployment  are  incurable  under  the  present  system. 

One  of  the  most  recent  pronouncements  based  on  the 
assumption  that  an  industrial  reserve  army  is  necessary 
to  the  existence  of  the  present  economic  system  is  con- 
tained in  a  recent  article  by  Ross  L.  Finney.^  Comment- 
ing upon  a  suggestion  of  mine  that  an  increase  in  the  num- 
ber and  quality  of  entrepreneurs,  technicians,  and  capital- 
ists would  greatly  increase  the  demand  for  labor  of  the 
lower  grades  and  thus  tend  to  raise  wages  and  eliminate 
unemployment,  Mr.  Finney  has  this  to  say:^ 

.  .  .  And  with  jobs  for  everybody  the  sky  would  be  the 
limit.  But  meantime  the  profits  of  marginal  entrepreneurs  would 
disappear;  whereupon  they  would  shut  down,  thus  throwing  men 
out  of  work — which  would  not  be  so  fine.     This  is  exactly  what 

^"Unemployment:  An  Essay  in  Social  Control,"  Social  Forces,  Septem- 
ber, 1926,  pp.  146-148. 

*  The  italics  in"  the  quotation  are  mine. 


AN  INDUSTRIAL  RESERVE  ARMY  321 

did  happen  between  1918  and  192 1  os  the  result  of  the  unusual 
war  demand  for  labor.  In  short,  the  surest  result  of  jobs  for 
everj'body  would  be  that  as  many  would  be  out  of  work  as  before. 
Nothing  would  so  surely  break  the  mainspring  of  our  economic 
machine  as  universal  emploj'ment. 

Automatically,  the  profits  system  constantly  maintains  a  great 
reserve  army  of  unemployed.  To  reduce  this  reserve  is  to  reduce 
viarginal  profits,  and  so  recruit  the  reserve.  To  abolish  the  reserve 
would  be  to  abolish  profits,  and  so  abolish  the  system.  By  one 
means  or  another  the  ratio  between  workers  and  jobs  must  be  main- 
tained. If  the  number  of  workers  cannot  be  increased  by  immigra- 
tion, then  the  number  of  jobs  must  be  decreased,  either  by  retrench- 
ment or  the  introduction  of  labor-saving  machinery.  The  reason 
there  are  too  few  jobs  is  because  it  would  wreck  the  system  to 
provide  them;  and  under  the  system  the  ratio  is  self-regulatory. 
In  other  words,  unemployment  is  a  fundamental  necessity,  and 
therefore  an  inevitable  by-product,  of  the  profits  system. 

The  next  question  is,  How  scarce  do  jobs  have  to  be?  The 
answer  is.  Just  scarce  enough  so  that  laborers  are  not  likely  to  get 
uppish,  make  unexpected  demands,  and  get  away  with  them.  Just 
scarce  enough,  in  other  words,  so  that  wages  are  definitely  under 
the  control  of  the  employing  class,  at  least  so  far  as  any  abrupt 
fluctuations  are  concerned.  And  under  what  circumstances  can 
the  laboring  class  be  depended  upon  to  sit  tight,  lick  the  hand  that 
feeds  them,  and  make  no  unexpected  demands?  The  answer  is, 
When  they  are  all  strictly  up  against  it,  with  just  barely  enough 
wages  to  make  ends  meets — almost,  and  distress  staring  them  in 
the  face  if  they  should  lose  their  jobs.  And  this  condition  can 
obtain  only  when  there  is  a  reserve  army  of  unemployed  sufficient 
to  keep  those  who  do  have  jobs  in  abject  fear  of  losing  them. 

All  of  which  fits  in  very  nicely  with  what  Ricardo  had  to  say: 
that  whatever  the  standard  of  living,  down  to  that  the  wage  scale 
tends  to  gravitate.  Except  that  Ricardo  did  not  make  it  quite 
clear  how  the  requisite  competition  among  laborers  is  maintained. 
Following  Malthus,  he  blamed  the  stork  entirely.  But  the  stork 
requires  reciprocal  cooperation.  Whatever  labor  supply  the  stork 
may  furnish,  the  profits  sj^stem  must  furnish  jobs  just  less  than 
enough  to  go  around.     And  that  the  profits  system  is  bound  to  do 


322  THIS  ECONOMIC  WORLD 

— automatically !     Until   the  leopard   changes   its  spots   and  the 
Ethiopian  his  skin. 

Before  taking  up  the  main  problem  of  a  reserve  labor 
supply,  I  should  like  to  call  attention  to  two  minor  points 
raised  by  Mr.  Finney.  As  to  the  slump  in  the  demand 
for  labor  between  1918  and  1919,  It  is  not  even  suggested 
that  this  was  the  result  of  a  normal  increase  in  the  num- 
ber and  quality  of  enterprisers,  technicians,  and  capital- 
ists. It  was  rather  the  result  of  an  excessively  Inflated 
war  demand  for  goods  (which  I  have  elsewhere^  shown 
to  have  been  unnecessary)  and  the  subsequent  deflation 
of  that  demand.  That  being  the  case,  it  has  no  bearing 
on  the  question  of  the  necessity  of  a  permanent  oversupply 
of  labor.  Again,  while  a  rise  of  real  wages  as  a  result 
of  an  increase  In  the  number  and  quality  of  enterprisers, 
technicians,  and  capitalists  would  eliminate  marginal 
profits  where  they  formerly  existed,  as  Mr.  Finney  sug- 
gests, it  is  obviously  fallacious  to  slide  from  this  to  the 
statement  that  it  would  eliminate  profits,  as  he  does  in  the 
italicized  portion  of  the  second  paragraph  of  the  above 
quotation.  Existing  marginal  profits  may  be  eliminated 
without  eliminating  all  profits.  There  is  merely  a  change 
in  the  establishments  that  are  on  the  margin;  the  old  ones 
having  been  pushed  below  the  margin  and  hence  out  of  ex- 
istence, a  new  group  now  occupies  the  marginal  positions. 
Any  increase  in  cost,  from  whatever  source,  unless  com- 
pensated by  increased  productivity  or  price,  tends  to  elimi- 
nate marginal  profits  and  marginal  enterprisers,  but  does 

'^Principles  of  National  Economy   (Boston,  Ginn  and  Company,   1921), 
chap.  xlix. 


AN  INDUSTRIAL  RESERVE  ARMY  323 

not  necessarily  destroy  the  whole  business  by  eliminating 
all  profits  and  all  enterprisers.  Intramarginal  profits  and 
intramarginal  enterprisers  may  remain.  New  items  of 
cost  are  continually  confronting  every  business  and  con- 
tinually weeding  out  the  weaker  establishments,  but  they 
seldom  destroy  a  whole  business — never,  in  fact,  except 
when  the  new  item  of  cost  is  so  great  as  to  be  prohibitive. 

If  we  are  permitted  to  assume  as  the  new  factor  in  the 
problem  an  increase  both  in  the  number  and  in  the  quality 
of  enterprisers,  technicians,  and  capitalists  with  no  in- 
crease in  the  number  of  wage  workers,  it  does  not  follow 
that  a  rise  of  wages  would  result  in  any  net  addition  to  the 
cost  of  production  except  to  the  inferior  employers  who 
were  holdovers  from  the  previous  condition.  The  in- 
creasing number  and  superior  quality  of  their  new  com- 
petitors would  force  each  establishment  to  pay  more  for 
its  labor  and  materials,  or  to  sell  its  product  at  a  lower 
price.  If  any  of  them  could  not  meet  this  new  situation, 
it  would,  of  course,  go  to  the  wall;  but,  instead  of  killing 
the  business,  this  would  merely  transfer  the  business  from 
the  hands  of  the  inferior  enterprisers  of  the  old  condition 
to  the  hands  of  the  new  and  superior  enterprisers,  tech- 
nicians, and  capitalists  who  have  entered  the  business. 
Because  of  their  superior  quality,  these  would  be  able  to 
pay  the  higher  wages  of  labor,  the  higher  prices  for  ma- 
terials, or  to  sell  at  lower  prices. 

If  there  were  an  improvement  in  the  quality  of  enter- 
prisers, technicians,  and  capitalist  investors  with  no  in- 
crease in  their  numbers,  it  is,  of  course,  conceivable  that 
they  might  absorb  the  results  of  the  superior  produc- 


324  THIS  ECONOMIC  WORLD 

tivity  of  industry  in  the  form  of  higher  profits,  salaries, 
and  interest  rates,  all  of  which  might  be  classified  under 
the  general  name  "rent  of  personal  ability."  But  it  is  a 
part  of  our  assumption  that  the  number  of  such  men  in- 
creases while  their  quality  Improves.  This  increase  of 
their  number  would  create  an  intensity  of  competition 
among  them  which  would  compel  the  industries  to  pay  as 
high  wages  for  labor  and  as  high  prices  for  raw  materials, 
or  to  sell  the  products  at  as  low  prices,  as  their  superior 
productivity  could  afford.  In  short,  profits,  interest,  and 
the  higher  salaries  would  tend  to  decrease,  certainly  not 
to  Increase,  leaving  the  chief  benefit  of  the  Increased  pro- 
ductivity of  Industry  to  go  to  the  wage  workers,  the 
producers  of  raw  materials,  or  to  the  consumers,  who,  of 
course,  include  the  wage  workers  and  the  producers  of  raw 
materials. 

Any  Industrial  or  non-agricultural  country  that  com- 
bines a  large  supply  of  manual  workers  with  a  dearth  of 
capable  enterprisers,  technicians,  and  capitalist  investors 
invariably  and  inevitably  shows  low  wages  and  unemploy- 
ment for  the  manual  workers  and  for  the  few  capable 
members  of  the  other  groups,  easy  profits,  large  salaries, 
and  high  interest  rates.  The  situation  Is  comparable  In 
principle  to  that  which  arises  In  an  agricultural  country 
where  there  are  large  numbers  of  workers  and  a  scarcity 
of  fertile  land.  This  situation  Invariably  means  low  labor 
incomes  for  workers,  but  relatively  high  rent  for  land. 
Conversely,  an  industrial  country  which  develops  large 
numbers  of  highly  capable  enterprisers,  technicians,  and 
capitalist  investors  and  which  manages  to  limit  its  supply 


AN  INDUSTRIAL  RESERVE  ARMY  325 

of  manual  laborers  invariably  shows  high  wages  and  rela- 
tively low  profits,  salaries,  and  interest  rates.  This  situa- 
tion is  comparable  in  principle  to  that  which  arises  in  an 
agricultural  country  where  there  is  an  abundance  of  fertile 
land  and  a  scarcity  of  high-grade  labor,  where  rent  is  rela- 
tively low  and  wages  relatively  high.  Such  are  the  his- 
torical facts.  The  table  presented  in  Chapter  I  (page 
61)  is  a  significant  illustration  of  this  tendency  in  agri- 
culture. 

The  theory  of  the  case  is  not  difficult  to  state.  The 
same  principle  holds  with  respect  to  the  mechanical  indus- 
tries. A  country  with  numerous  enterprisers,  technicians, 
and  capitalist  investors,  all  of  high  quality  and  all  active, 
will  expand  its  industries.  The  expansion  of  industries 
will  call  for  more  and  more  manual  workers.  Other 
countries  with  fewer  and  weaker  enterprisers,  technicians, 
and  capitalist  investors  will  then  shift  their  burden  of 
unemployment  upon  the  fortunate  country  by  exporting 
their  surplus  manual  workers  to  it,  unless  it  restricts  im- 
migration. Even  though  immigration  be  restricted,  unless 
emigration  be  also  restricted,  the  favored  country  will 
export  enterprisers,  technicians,  and  capital  (to  a  certain 
extent  also  investors  of  capital)  to  less  favored  countries. 
Thus  Germany,  before  the  war,  was  exporting  enter- 
prisers, technicians,  and  capital,  but  no  manual  laborers, 
to  the  countries  to  the  south  and  east,  and  importing  cer- 
tain kinds  of  low-grade  labor,  but  no  enterprisers,  tech- 
nicians, or  capitalists  from  those  same  countries.  Under 
stable  conditions  we  in  the  United  States  also  export  en- 
terprisers, technicians,  and  capital,  but  no  manual  labor- 


326  THIS  ECONOMIC  WORLD 

ers,  to  Mexico,  and  it  is  notorious  that  we  are  importing 
hundreds  of  thousands  of  Mexican  peons,  but  no  enter- 
prisers, technicians,  or  capitalists  from  that  country. 

The  exportation  of  enterprisers,  technicians,  and  capi- 
tal to  such  countries  as  Russia,  the  Balkans,  or  Mexico  is 
a  good  thing  for  the  laborers  of  those  countries  but  a  bad 
thing  for  those  who  formerly  enjoyed  there  a  partial  mo- 
nopoly of  talent  or  of  invested  capital.  The  importation  of 
cheap  labor  from  those  countries  to  a  capitalistic  country  Is 
a  good  thing  for  those  in  noncompeting  groups,  especially 
for  enterprisers,  technicians,  and  capitalists,  but  a  bad 
thing  for  the  manual  workers  of  the  countries  to  which 
the  immigrants  come.  Laborers  themselves  (as  distinct 
from  those  who  pose  as  spokesmen  for  labor)  correctly 
sense  the  situation.  In  the  absence  of  restrictions,  indoor 
laborers  invariably  move  away  from  countries  in  which 
there  is  little  enterprise,  technical  training,  and  capital 
toward  countries  where  these  things  are  abundant,  just  as 
outdoor  laborers  move  from  countries  where  good  land  is 
scarce  to  countries  where  it  is  abundant  relatively  to  labor. 
There  are  sound  theoretical  and  practical  reasons  why 
they  should  behave  in  this  way. 

High  general  wages  in  industry  are  nowadays  invari- 
ably associated  with  ample  equipment  in  the  form  of 
power-driven  machinery,  giving  a  large  product  per  man, 
without  which  high  wages  would  be  impossible.  The 
proposition  will  scarcely  be  disputed  that  in  the  industrial 
field  a  large  product  per  man  is  as  dependent  upon  ample 
equipment  in  the  way  of  power  and  power-driven  ma- 
chinery as  in  agriculture  it  is  upon  an  abundance  of  land. 


AN  INDUSTRIAL  RESERVE  ARMY  327 

The  only  question  would  be  as  to  what  factors  are  nec- 
essary to  secure  ample  equipment  in  these  forms  of  capi- 
tal goods.  The  comparative  figures  presented  on  page 
61  well  Illustrate  this  point. 

Ample  equipment  requires  at  least  three  things;  first, 
plenty  of  capital  to  invest  in  it;  second,  technicians  to  in- 
vent and  install  it;  third,  enterprisers  to  effect  a  working 
organization  and  bring  labor  and  equipment  Into  working 
harmony.  Let  any  of  these  three  things  be  absent,  and 
the  result  is  impossible.  Let  them  all  be  present  and 
active,  and  the  result  is  inevitable. 

One  man  under  highly  efficient  management  may  run 
sixty  looms,  turning  out  a  large  product  per  man,  even 
though  the  product  per  loom  may  be  relatively  small.  But 
to  equip  every  weaver  with  sixty  looms  requires  not  only 
a  large  amount  of  capital,  but  also  capable  technicians 
and  enterprisers.  When  the  problems  are  worked  out  sat- 
isfactorily, a  textile  factory  that  can  combine  sixty  looms 
with  one  man  can  pay  higher  wages  than  can  be  paid 
by  a  factory  that  can  combine  only  four  looms  with  one 
weaver. 

The  activity  of  inventors  and  organizers  in  this  direc- 
tion increases  the  demand  for  capital  relatively  to  the  de- 
mand for  labor,  and  if  capital  does  not  Increase  in  quan- 
tity to  meet  that  demand,  it  would  merely  increase  interest 
rates  until  the  rising  overhead  cost  in  the  form  of  interest 
would  check  the  tendency  to  substitute  capital  (or  ma- 
chinery) for  labor.  But  if  thrift  campaigns  and  other 
movements  for  the  increase  of  capital  are  successful,  so 
that  capital  increases  more  rapidly  than  these  new  oppor- 


328  THIS  ECONOMIC  WPRLD 

tunlties  for  its  investment,  interest  (i.e.,  net  or  pure  in- 
terest) may  disappear  in  spite  of  the  increase  in  the  de- 
mand for  capital.  In  fact,  no  one  could  afford  to  com- 
bine sixty  looms  with  one  weaver  except  where  interest 
rates  were  relatively  low  and  wages  high. 

This  brings  us  to  one  of  the  most  difficult  and  at  the 
same  time  one  of  the  most  important  of  all  economic  prin- 
ciples, and  the  reader  is  requested  to  exercise  his  patience 
as  well  as  his  reasoning  power  in  studying  it.  It  may  be 
called  the  principle  of  reciprocity  among  the  factors  of 
production,  or  the  reciprocal  influence  of  one  factor  upon 
another.  To  those  who  have  never  grasped  this  idea  it 
seems  a  contradiction  to  say  that  two  or  more  factors  mu- 
tually determine  one  another.  It  is  really  no  more  of  a 
contradiction  than  to  say  that  the  three  legs  of  a  tripod 
mutually  support  one  another.  To  say  that  without  the 
third  the  other  two  would  fall  does  not  mean  that  the 
third  is  capable  of  standing  alone.  We  find  this  principle 
everywhere,  in  economics  as  well  as  in  physics  or  engineer- 
ing. 

The  relationship  on  the  market  between  different  fac- 
tors of  production  is  that  of  reciprocity,  each  one  helping 
the  market  for  the  other.  An  abundant  supply  of  capi- 
tal seeking  investment  helps  the  market  for  inventions  in 
which  the  new  capital  can  be  invested.  A  scarcity  of  in- 
vestible  capital  makes  a  poor  market  for  the  products  of 
the  inventor.  An  abundance  of  both  capital  and  inven- 
tions furnishes  a  good  market  for  the  work  of  the  enter- 
priser, and  so  on.  This  principle  runs  through  all  our 
economic  life.    Its  most  conspicuous  and  distressing  form 


AN  INDUSTRIAL  RESERVE  ARMY  329 

is  the  relation  between  an  abundant  supply  of  cheap  labor 
and  the  prosperity  of  all  other  classes.  A  more  hopeful 
but  less  conspicuous  form  is  the  relation  between  an  abun- 
dant supply  of  everything  besides  manual  labor,  including 
not  only  capital,  but  also  inventors,  enterprisers,  and  pro- 
fessional and  artistic  talent,  and  the  prosperity  of  the 
manual  workers. 

So  general  has  been  the  oversupply  of  manual  labor 
that  many  minds,  especially  among  the  employing  classes, 
have  come  to  regard  it  as  normal  and  inevitable.  Those 
who  find  it  convenient  to  run  business  by  the  "hire  and 
fire"  method,  who,  when  they  need  extra  help  cannot  im- 
agine themselves  doing  anything  more  than  hanging  out 
a  shingle  saying  "men  wanted,"  are  likely  to  say  that  they 
could  not  run  their  business  in  any  other  way.  Even  if 
that  were  true,  it  would  not  follow  that  a  smarter  man- 
ager might  not  do  so.  The  only  question  is,  can  we  get 
smarter  managers?  Certain  householders  who  have 
always  been  accustomed  to  trains  of  hereditary  household 
servants  cannot  imagine  how  a  household  could  be  run 
without  them;  nevertheless,  rnore  capable  household  man- 
agers might  do  so.  Again,  can  we  get  more  capable  house- 
hold managers? 

Educational  policies  may  aim  at  different  objects. 
Within  limits  it  is  possible  to  accomplish  any  purpose  for 
which  an  educational  system  is  intelligently  planned.  One 
possible  object  is  to  solve  the  labor  problem,  first,  by  giv- 
ing employment  to  all  who  want  it,  second,  by  raising  all 
wages  to  a  level  that  will  permit  comfort,  culture,  and  ac- 
cumulation of  enough  capital  to  provide  for  emergencies 


330  THIS  ECONOMIC  WORLD 

and  old  age.  Most  other  so-called  solutions  are  attempts 
to  keep  laborers  contented  with  their  condition.  I  shall 
try  to  show  that  one  way  to  bring  about  universal  em- 
ployment at  high  wages  is  to  change  the  ratio  between 
the  kinds  of  labor  that  are  not  universally  employed  and 
the  other  factors  of  production.  This  brings  us  to  the 
main  thesis. 

A  good  approach  to  the  problem  of  wages  In  Indoor  In- 
dustry is  to  begin  with  agriculture.  It  is  an  observed  fact 
that  the  ratio  between  the  number  of  workers  on  the  one 
hand  and  the  quantity  of  land  and  equipment  on  the  other 
has  a  great  deal  to  do  with  the  distribution  of  the  agri- 
cultural income.  This  observed  fact  rests  upon  another, 
namely,  that  in  the  growing  of  given  crops  the  product 
per  worker  increases,  up  to  a  certain  limit,  as  he  is  given 
more  land  and  equipment  on  and  with  which  to  work. 
Conversely,  the  product  per  acre  of  land  increases  as  more 
workers  and  equipment  are  applied  to  its  cultivation.  The 
statement  of  this  general  reciprocal  influence  has  been  re- 
fined in  the  form  of  the  law  of  diminishing  returns,  which 
need  not  be  restated  here.  It  follows  from  these  observed 
facts  that  if  you  wish  to  increase  the  product  of  each  farm 
worker,  one  way  to  do  it  is  to  give  him  more  land  on 
which  to  work,  or  better  equipment  with  which  to  work, 
or  a  combination  of  both.  If  the  farmer  is  enabled  to  in- 
crease the  quantity  of  land  and  equipment  per  worker, 
not  by  bidding  a  higher  price  for  them  but  by  reason  of 
the  fact  that  land  and  equipment  have  increased  in  abun- 
dance and  are  forced  onto  the  market  at  low  prices,  then 
the  increase  in  the  land  and  equipment  per  worker  does 


AN  INDUSTRIAL  RESERVE  ARMY  331 

not  involve  any  necessary  increase  in  the  total  rent  and  in- 
terest charges.  Since  there  is  a  larger  product  without 
any  increase  in  rent  and  interest,  the  increase  will  go 
either  as  profits  to  the  farmer  or  as  wages  to  farm  labor. 
Where  the  farmer  does  his  own  work,  it  makes  little  dif- 
ference to  him  whether  his  increased  income  is  called 
profits  or  wages.  In  case  the  farmers  hire  their  laborers, 
if  farmers  are  numerous  and  laborers  scarce  and  hard  to 
find,  it  is  certain  that  the  increased  income  will  go  as 
wages  rather  than  as  profits. 

In  indoor  industries  the  same  principle  holds  except 
that  land  is  a  minor  factor  and  may  be  neglected.  Equip- 
ment, however,  is  of  even  more  importance  here  than  in 
agriculture.  It  is  an  observed  fact  that  a  large  product 
per  worker  is  secured  by  ample  equipment  in  the  form  of 
power  and  power-driven  machinery.  In  this  case,  if 
equipment  increases  as  an  independent  variable  and  not  in 
response  to  higher  prices  offered,  that  is,  if  through  in- 
creased saving  capital  piles  up,  if,  through  increased  ac- 
tivity on  the  part  of  increased  numbers  of  inventors, 
engines  and  machinery  increase  in  quantity  and  improve 
in  quality,  and  if,  through  increased  activity  by  increased 
numbers  of  superior  enterprisers,  all  this  equipment  is 
brought  into  the  market  while  manual  workers  are  de- 
creasing in  numbers  through  restriction  of  immigration 
and  a  decline  in  the  birth  rate  among  working  people, 
then  the  equipment  must  force  itself  onto  the  market  for 
what  it  will  bring,  and  the  increased  product  per  man  will 
go  mainly  as  wages.  The  scarcity  of  labor  will  insure 
that. 


332  THIS  ECONOMIC  WORLD 

Again,  the  question  may  be  asked,  Will  not  the  lower 
interest  rates,  the  lower  profits  and  salaries,  decrease  sav- 
ing, inventiveness,  and  enterprise?  They  will  rather 
operate  as  a  check  upon  the  further  increase  of  saving, 
inventiveness,  and  enterprise.  One  result  of  thrift  cam- 
paigns is  to  induce  people  to  save  increasing  quantities  of 
capital  at  decreasing  rates  of  interest,  but  this  tendency 
is  self-limiting.  It  results  in  a  new  equilibrium  in  which 
there  is  a  permanent  increase  of  saving  at  permanently 
lower  rates  of  interest.  One  result  of  increasing  numbers 
of  technical  schools  of  higher  and  higher  quality  is  to 
increase  the  number  and  quality  of  inventors  and  techni- 
cians. The  falling  salaries  will  eventually  check  that  tend- 
ency to  increase  and  result  in  a  new  equilibrium  in  which 
there  will  be  a  permanent  increase  in  the  number  and 
quality  of  technicians  at  permanently  lower  salaries.  Simi- 
larly, increasing  numbers  of  business  schools,  of  higher 
and  higher  qualities,  at  lower  tuition  rates,  will  result  in 
more  and  better  enterprisers.  Falling  profits  will  check 
this  tendency  but  will  result  in  a  permanently  larger  num- 
ber of  enterprisers  of  better  quahty  at  permanently  lower 
profits. 

In  the  same  way,  the  restriction  of  immigration  and  a 
rise  in  the  standard  of  living  which  reduces  the  birth  rate 
will  reduce  the  number  of  manual  laborers,  thus  making 
it  more  difficult  for  enterprisers  to  find  help  and  forcing 
them  to  pay  higher  wages.  These  higher  wages  tend  to 
check  the  tendency;  that  is,  a  point  is  reached  where  even 
the  superior  enterprisers  cannot  advance  wages  any  fur- 
ther, but  this  results  in  a  new  equilibrium  in  which  wages 


AN  INDUSTRIAL  RESERVE  ARMY  333 

are  permanently  higher.  The  same  thing  bruigs  about  a 
more  steady  employment.  When  enterprises  tend  to  mul- 
tiply until  they  cannot  multiply  any  further  because  of 
the  scarcity  of  manual  workers,  obviously  manual  work- 
ers find  it  easier  to  get  jobs,  to  choose  when  they  will  work 
and  when  they  will  not,  and  involuntary  unemployment  is 
eliminated. 

This  shifting  of  the  equilibrium  point  is  the  thing  that 
needs  to  be  understood  if  one  Is  to  grasp  the  significance 
of  what  Is  going  on  In  the  economic  world.  The  prin- 
ciple involved  Is  illustrated  In  Figure  4. 

Let  us  assume  that  the  quantity  of  a  given  commodity, 
say  labor.  Is  measured  along  the  line  OX,  while  both  its 
cost  of  production  and  Its  price  are  measured  along  the 
line  OY.  Let  us  assume  also  that  Its  cost  curve  at  one 
time  is  represented  by  the  curve  AB  while  its  demand 
curve  Is  represented  by  the  curve  CB.  That  being  the 
case,  the  equilibrium  price  Is  represented  by  the  horizontal 
line  DB. 

By  the  equilibrium  price  is  meant  the  price  at  which 
the  market  clears  itself,  that  is,  the  price  which  will  In- 
duce producers  to  continue,  under  the  same  conditions,  to 
bring  to  the  market  exactly  as  much  as  It  will  induce  buy- 
ers to  take  off  the  market.  If,  for  any  unforeseen  reason, 
buyers  want  more  at  the  existing  price  than  producers  are 
willing  to  bring  at  the  existing  price,  the  price  tends  to  go 
up  until  the  equilibrium  is  again  approximated.  If,  for 
some  unforeseen  reason,  producers  bring  to  the  market 
more  than  buyers  are  willing  to  take  at  the  existing  price, 
the  price  tends  to  fall  until  the  equilibrium  Is  again  ap- 


334 


THIS  ECONOMIC  WORLD 


Figure  4:   Graphical   representation   of   the    establishment  of   equilibrium 

prices. 

proximated.  Thus,  the  normal  price  may  be  said  to  be  the 
equilibrium  price,  or  the  price  about  which  market  prices 
tend  to  fluctuate. 

Now,  in  the  above  diagram,  with  the  above  assump- 
tions, let  us  suppose  that  there  has  been  a  change  in  the 
cost  of  production.  In  the  case  of  labor,  immigration  be- 
ing eliminated,  the  cost  is  what  men  and  women  think 
they  must  have  before  they  will  marry  and  undertake  the 
support  of  a  .family.     If  their  standards  on  that  subject 


AN  INDUSTRIAL  RESERVE  ARMY  335 

are  high,  that  Is,  if  they  will  not  marry  until  they  can 
afford  life  insurance,  a  savings  account,  and  a  Ford  car, 
this  makes  an  expensive  family,  and  no  children  will  be 
legitimately  born  except  in  families  that  can  afford  these 
things.  Eventually  this  will  thin  out  laborers.  But  this 
thinning  out  of  laborers  will  raise  wages  and  make  it  pos- 
sible to  afford  these  things.  Will  this  rise  in  wages  so  in- 
crease the  marriage  and  the  birth  rate  as  to  force  wages 
down  again  to  the  old  level?  It  will  not,  because  to  do  so 
would  be  to  deprive  families  of  these  requisites  for  mar- 
riage, and  they  would  stop  multiplying  before  that  point 
would  be  reached. 

The  rise  in  the  standard  of  living  operates  as  an  in- 
crease in  cost.  This  increase  in  cost  may  be  pictured  in 
our  diagram  by  raising  the  curve  AB  to  the  dotted  curve 
A'B\  This  would  tend  to  reduce  the  supply  of  labor  from 
OE  to  OE'.  This  reduced  supply  of  labor  would  tend  to 
raise  wages  until  the  new  equilibrium  wages  would  be  rep- 
resented by  the  dotted  line  D'B'  instead  of  by  the  solid 
line  DB. 

This  line  D'B'  now  represents  the  new  equilibrium 
wage,  as  the  line  DB  represented  the  old  equilibrium 
wage.  It  represents  the  price  at  which,  with  the  new 
standard  of  living,  the  producers  of  labor  are  willing  to 
put  on  the  labor  market  exactly  as  much  labor  as  the 
buyers  of  labor  are  willing  to  take  off  the  market. 

If  we  assume  not  only  an  increase  in  the  cost  of  pro- 
ducing a  commodity  but  also  an  increase  in  the  demand  for 
it,  we  get  a  still  more  violent  shifting  upward  of  the  equi- 
librium price.    Let  the  curve  C"B"  represent  the  increase 


336  THIS  ECONOMIC  WORLD 

in  demand.  In  that  case  the  new  equilibrium  price  be- 
comes D"B"  instead  of  D'B'.  The  wages  of  labor  may 
now  be  quite  sufficient  to  induce  laborers  with  a  markedly 
higher  standard  of  living  to  marry  as  early  and  multiply 
as  rapidly  as  did  those  with  a  lower  standard  of  living 
and  lower  wages. 

The  same  general  principle  of  the  shifting  of  the  equi- 
librium price  works  in  the  opposite  direction  if  we  assume 
an  opposite  change  in  one  of  the  factors.  This  may  be 
shown  in  Figure  5. 

Let  us  suppose  in  this  case  that  the  amount  of  saving  is 
measured  along  the  line  OX,  the  cost  of  saving  and  the 
demand  for  capital  along  the  line  OY,  that  the  solid  curve 
AB  represents  the  cost  of  saving  and  the  solid  curve  CB 
the  demand  for  capital.  In  this  case,  the  equilibrium  rate 
of  interest  is  represented  by  the  solid  line  DB.  Now  sup- 
pose that  a  change  comes  In  the  habits  of  the  people,  or  in 
their  relative  appreciation  of  present  and  future,  so  that 
saving  becomes  m.uch  less  irksome  than  it  used  to  be.  This 
change  could  be  represented  in  the  diagram  by  dropping 
the  solid  curve  AB  to  the  dotted  curve  A'B'.  This  would 
tend  to  increase  the  amount  of  saving,  but  this  increase 
would  tend  to  lower  the  rate  of  interest.  This  lowering 
of  the  rate  of  interest  would,  of  course,  tend  to  check  the 
tendency  to  further  saving,  but  it  would  not  completely 
neutralize  the  tendency  and  restore  the  old  rate.  It 
would  shift  the  equilibrium  rate  to  a  lower  level;  that  is, 
the  equilibrium  rate  of  Interest  would  fall  from  the  solid 
line  DB  to  the  dotted  line  D'B'.  This  lower  price  would 
now  be  sufficient  to  induce  as  much  saving  as  the  demand 


AN  INDUSTRIAL  RESERVE  ARMY  337 


Y 

C 

^^ 

D 

^\ 

nP 

D' 

^y^        y 

1 
1 

^^ 

1         w 

0  A 
A' 

r^.-'        EE'    '^ 

Figure  5 :  Graphical  representation  of  the  shifting  of  the  equilibrium  price. 

for  capital  would  take  off  the  market  at  that  price. 
All  this  leads  to  the  conclusion  that  a  permanent  change 
in  the  distribution  of  our  national  income  can  be  effected 
by  changing  some  of  the  original  factors  In  the  problem. 
Cultivation  of  habits  of  thrift  can  permanently  lower  the 
rates  of  interest;  encouragement  of  more  and  more  men 
to  become  enterprisers  and  technicians  can  permanently 
lower  profits  and  the  higher  salaries.  Raising  the  stand- 
ard of  living  of  laborers  can  permanently  raise  their 
wages,  and  if  all  these  things  can  be  done  at  the  same 


338 


THIS  ECONOMIC  WORLD 


time,  a  general  shift  in  the  direction  of  equality  among  all 
occupations  can  be  brought  about. 

One  and  only  one  condition  can  permanently  interfere 
with  the  tendency  toward  an  equilibrium  of  the  labor  mar- 
ket and  leave  a  surplus  of  labor  seeking  employment. 
That  Is  a  trade-union  policy  or  some  form  of  government 
interference  that  will  force  wages  above  the  equilibrium 
point.  This  may  be  Illustrated  by  the  diagram  In  Figure  6. 

Let  us  suppose,  as  in  the  preceding  diagrams,  that  AB 
represents  the  supply  curve  (or  the  cost  curve)  of  a  given 


Figure  6:  Graphical   representation  of  interference  with  the  equilibrium 
of  the   labor   market. 


AN  INDUSTRIAL  RESERVE  ARMY  339 

class  of  labor,  that  CB  represents  the  demand  curve  for 
It,  and  that  DB  represents  the  equilibrium  wage,  that  Is, 
the  wage  at  which  the  available  supply  of  that  kind  of 
labor  would  all  be  employed.  If  an  artificially  high  wage 
were  established  by  law  or  by  union  policy  represented 
by  the  dotted  line  D'B',  then,  the  demand  remaining  the 
same,  the  number  employed  at  the  new  wage  would  be 
represented  by  the  distance  OE'  instead  of  by  the  dis- 
tance OE.  The  latter  being  the  actual  number  seeking 
employment,  the  number  represented  by  the  distance  E'E 
would  fail  to  find  employment. 

Far  from  being  a  necessary  condition  of  the  present 
economic  system,  this  so-called  labor  reserve  is  the  product 
of  Interference  with  the  system.  If  let  alone,  the  profits 
systems  would  tend  to  eliminate  this  labor  reserve  by  low- 
ering wages  until  the  entire  available  supply  would  be 
employed.  It  may  be  a  wise  policy  to  establish  a  wage 
above  the  equilibrium  wage,  that  is,  it  may  be  better  to 
pay  high  wages  to  those  who  can  find  employment  and 
leave  the  rest  unemployed,  but  it  cannot  be  said  that  this 
is  essential  to  the  profits  system.  It  would  be  essential, 
rather,  to  some  policy  of  interference  with  the  system. 
Whether  it  be  wise  thus  to  interfere  is  another  question. 

Another  point  should  be  mentioned  that  does  not  viti- 
ate our  argument,  but  that  may  confuse  the  non-theo- 
retical mind.  Not  all  workers  want  continual  employ- 
ment. High  school  and  college  boys  and  girls  frequently 
want  employment  during  the  summer  months,  farm  work- 
ers want  Indoor  work  during  the  winter  months,  women 
with   famihes  want  employment  at  times  when   family 


340  THIS  ECONOMIC  WORLD 

cares  do  not  interfere  and  do  not  want  it  at  other  times. 
This  kind  of  labor  exists  independently  of  the  profits  sys- 
tem, would,  in  fact,  exist  under  any  system.  It  therefore 
furnishes,  at  times,  a  small  labor  reserve  which  the  exist- 
ing system  may  make  use  of  but  which  is  not  essential  to 
the  existence  of  the  system. 

Another  point  of  much  greater  theoretical  and  prac- 
tical importance  is  that  the  presence  of  an  industrial  re- 
serve army  is  more  a  cause  than  a  result  of  these  uneven- 
nesses  of  business  sometimes  called  the  business  cycle,  and 
the  elimination  of  the  industrial  reserve  army  would  go  a 
long  way  toward  ironing  out  these  unevennesses. 

It  is  coming  to  be  realized  that  something  is  needed  to 
act  as  a  drag  or  a  brake  upon  the  overexpansion  of  busi- 
ness in  boom  times.  If  business  is  permitted,  with  no 
hindrance  or  retarding  factor,  to  expand  as  rapidly  as  it 
wants  to,  it  will  overdevelop  at  one  time,  and  this  over- 
development will  be  followed  by  a  period  of  excessive 
stagnation. 

The  only  effective  check  that  works  automatically  is  an 
increase  in  the  cost  of  production.  If,  when  orders  are 
coming  in  rapidly,  every  manufacturer  can  increase  his 
production  without  having  to  pay  a  higher  price  for  any 
of  the  things  he  needs,  raw  materials,  labor,  loans,  and  so 
forth,  there  is  no  effective  drag.  That  is,  if  he  can  hire 
increased  numbers  of  workers  at  the  same  wages,  buy  in- 
creased quantities  of  raw  materials  at  the  same  prices, 
borrow  increased  sums  of  working  capital  at  the  same 
rates  of  interest,  there  is  no  drag  on  the  expansion  of  his 
business.     But. if  a  boom,  anticipated  or  potential,  finds 


AN  INDUSTRIAL  RESERVE  ARMY  341 

him  unable  to  get  more  labor  without  offering  higher 
wages  for  it,  to  buy  increasing  supplies  of  raw  materials 
without  bidding  higher  prices  to  get  it,  or  to  borrow  more 
working  capital  without  paying  higher  rates  of  interest, 
these  things  act  as  a  drag  and  prevent  excessive  booms. 
Again,  if  a  depression  should  begin,  if  all  these  wages, 
prices,  and  interest  rates  tend  to  fall,  this  would  stimulate 
the  profit  makers  to  increased  activity  and  thus  smooth 
out  the  depression. 

In  the  past  we  have  had  to  rely  mainly  upon  variations 
in  the  rate  of  interest  to  act  as  a  repressant  in  boom  times 
and  a  stimulant  in  times  of  depression.  Lately,  the  Fed- 
eral Reserve  Board  has  acted  in  a  rather  positive  manner 
to  increase  the  efficiency  of  the  depressant  and  the  stimu- 
lant. But  the  principal  item  of  cost  is  not  interest  on  loans 
but  the  wages  of  labor.  So  long  as  there  is  a  large  labor 
reserve,  there  need  be  no  increase  in  wage  cost  in  boom 
times  and  decrease  in  times  of  depression  to  act  as  a  de- 
pressant and  a  stimulant.  But  if  there  were  no  reserve 
labor  army,  then  when  every  employer  wanted  to  expand 
his  business  to  take  advantage  of  an  active  market,  he 
could  not  get  indefinite  supplies  of  new  labor  by  merely 
hanging  out  a  shingle  saying  "men  wanted."  In  fact,  he 
could  not  get  extra  help  at  all  in  a  real  boom.  All  em- 
ployers would  be  wanting  extra  help  at  the  same  time  and 
they  would  merely  bid  against  one  another  for  the  help 
that  was  already  employed.  This  would  put  a  more  effec- 
tive drag  on  a  business  boom  than  a  mere  rise  in  the  in- 
terest rate  could  possibly  do. 

Of  course,  so  long  as  there  are  considerable  numbers  of 


342  THIS  ECONOMIC  WORLD 

workers  who,  as  pointed  out  above,  do  not  want  work  all 
the  time,  that  preference  of  theirs  will  create  a  small  labor 
reserve,  so  that  there  is  never  likely  to  be  a  complete  ab- 
sence of  labor  reserve.  But  this  reserve  is  created  by  the 
preferences  of  the  workers  themselves  and  not  by  the 
necessities  of  the  profits  system.  In  fact,  this  system 
would  be  better  off  without  it.  Again,  so  long  as  a  labor 
reserve  is  artificially  created  by  forcing  actual  wages 
above  the  equilibrium  level,  it  will  always  be  possible  to 
hire  and  fire,  to  employ  increasing  numbers  without 
increasing  wage  rates  in  times  of  business  activity  and  de- 
creasing numbers  without  lowering  wages  in  times  of  busi- 
ness depression.  However,  this  condition  is  created  by 
artificial  restraint  and  not  by  the  necessities  of  the  so- 
called  profits  system.  In  fact,  the  profits  system  tends  to 
eliminate  it  and  would  work  much  better  if  it  could  be 
eliminated. 

Other  and  more  striking  changes  even  than  steadiness 
of  employment  and  the  increase  in  wages  can  also  be 
brought  about.  The  independence  of  the  laborer  results 
automatically  from  these  changes.  Where  there  is  a 
surplus  of  laborers  or  a  dearth  of  jobs,  of  course  the 
laborer  is  very  dependent.  He  will  think  twice  before 
quitting  a  job  already  held.  But  when  any  kind  of  labor 
becomes  scarce  and  hard  to  find,  it  is  the  employer  and  not 
the  laborer  who  is  dependent.  The  housekeeper  who 
knows  that  her  cook  has  several  other  positions  open  and 
that  she  herself  might  not  be  able  to  find  another  cook  is 
the  dependent  person,  and  the  cook  is  the  independent 
one.    The  Kansas  farmer  whose  wheat  is  ripe  for  the  har- 


AN  INDUSTRIAL  RESERVE  ARMY  343 

vest  and  who  cannot  find  harvest  hands  to  help  him  har- 
vest it  is  another  dependent  person,  while  the  farm  hand 
is  the  independent  one.  This  condition  is  not  the  result 
of  some  occult  or  mysterious  power  that  goes  with  cook- 
ing or  wheat  harvesting;  it  is  the  result  of  the  relative 
scarcity  of  cooks  and  harvest  hands,  or  the  relative  abun- 
dance of  housekeepers  who  want  cooks  and  farmers  who 
want  help. 

It  may  be  argued,  however,  that  where  there  is  such 
an  acute  scarcity  as  the  above  illustrations  imply,  there  is 
as  yet  no  true  equilibrium  wage,  or  that  the  actual  wages 
are  not  high  enough  to  establish  a  true  equilibrium  under 
which  there  would  be  exactly  as  many  seeking  the  wages 
as  there  were  those  willing  to  pay  them.  The  illustra- 
tions were  chosen  deliberately  for  the  purpose  of  bringing 
out  the  fact  that,  in  a  dynamic  situation  created  by  a  pro- 
gressive increase  in  the  number  and  the  quality  of  enter- 
prisers, technicians,  and  capitalist  investors,  while  the  sup- 
ply of  manual  workers  does  not  keep  pace  with  the  in- 
creasing demand,  wages  not  only  tend  to  rise,  but  there  is 
a  lag  in  the  rise  of  wages.*  That  is,  wages  are  always 
approaching  the  equilibrium  point,  but  the  point  itself 
moves  upward,  so  that  before  the  equilibrium  is  estab- 
lished, it  is  again  disturbed.  In  this  progressive  condition 
we  invariably  find  not  only  rising  wages  but  also  a  grow- 
ing independence  of  labor. 

Show  me  any  situation  where  laborers  of  any  kind, 
manual  or  mental,  are  scarce  and  hard  to  find — that  is, 

^  To  accelerate  the  rise  of  wages  and  reduce  the  extent  of  the  lag  is,  of 
course,  a  legitinaate  purpose  of  labor  organization  activity. 


344  THIS  ECONOMIC  WORLD 

where  employers  want  more  laborers  than  are  to  be  had 
— and  I  can  show  you  a  place  where  laborers  are  inde- 
pendent. Show  me  a  situation  anywhere  where  any  kind 
of  labor  (cooks  and  farmhands  as  well  as  other  kinds)  is 
abundant  and  easy  to  find  and  where  jobs  are  hard  to  find 
— that  is,  where  laborers  want  more  jobs  than  are  to  be 
had — and  I  can  show  you  a  place  where  that  class  of 
laborers  (even  including  cooks  and  farm  hands)  is  de- 
pendent. In  the  days  of  free  immigration  to  this  country, 
many  classes  of  laborers  were  in  that  position  of  depend- 
ence. At  the  present  time,  few  of  them  are.  If  present 
tendencies  continue,  there  will  be  fewer  and  fewer  in  that 
position  of  dependence. 

However,  even  though  wages  should  reach  a  condition 
of  stable  equilibrium  at  a  high  level,  that  is,  even  though 
there  should  be  permanently  just  as  many  laborers  seek- 
ing jobs  at  high  wages  as  there  would  be  jobs  seeking 
laborers  at  those  wages,  it  can  be  shown  that  the  inde- 
pendence of  laborers  would  be  much  greater  than  where 
the  equilibrium  wage  is  a  low  one.  Wages  are  only  one 
of  the  inducements  to  take  jobs.  Work  which  interferes 
with  a  particularly  agreeable  diversion  is  less  attractive, 
other  things  equal,  than  work  which  permits  that  diver- 
sion. The  former  requires  a  higher  wage  than  the  latter 
in  order  to  bring  about  an  equilibrium  between  the  num- 
bers of  laborers  seeking  jobs  and  the  number  of  jobs  seek- 
ing laborers. 

In  general,  independence,  or  the  ability  to  choose 
among  a  considerable  number  of  goods  or  activities,  is 
considered  desirable.     Men  who  can  afford  this  desirable 


AN  INDUSTRIAL  RESERVE  ARMY  345 

condition  are  likely  to  be  willing  to  sacrifice  a  little  money 
in  order  to  enjoy  it.  They  who  have  plenty  of  money  in 
their  pockets  are  more  likely  to  sacrifice  the  chance  of 
making  more  money  in  order  to  enjoy  this  feeling  of  in- 
dependence than  are  those  who  have  no  money  and  who 
have  needy  families.  The  latter  will  sacrifice  independ- 
ence for  cash,  while  the  former  will  frequently  sacrifice 
cash  for  independence. 

In  general,  the  basic  necessaries  of  life  must  take  prece- 
dence over  luxuries  and  comforts,  even  the  comfort  of 
feeling  independent  in  one's  field  of  choice.  When  laborers 
generally  are  barely  able  to  afford  the  basic  necessaries  of 
life,  they  are  likely  to  sacrifice  the  comfortable  feeling  of 
independence  by  accepting  jobs  that  are  confining,  that 
offer  few  opportunities  for  diversion,  or  that  put  them 
under  the  domination  of  an  overbearing  boss.  But  when 
laborers  are  generally  well  paid,  have  money  in  their 
pockets,  and  are  able  to  supply  their  families  not  only 
with  the  basic  necessaries  of  life  but  with  numerous  com- 
forts and  luxuries  besides,  then  the  comfort  or  luxury  of 
feeling  independent  comes  Into  their  field  of  choice.  An 
overbearing  boss  will  then  have  a  harder  time  filling  his 
shop  than  the  boss  who  treats  his  men  as  comrades  In  a 
common  enterprise.  The  job  that  involves  a  loss  of  Inde- 
pendence will  have  to  pay  a  much  higher  wage  to  bring 
about  an  equilibrium  than  the  job  that  leaves  a  good  de- 
gree of  Independence. 

But  will  not  the  multiplication  of  numbers  again  reduce 
laborers  to  the  necessity  of  competing  so  strenuously  for 
jobs  as  to  destroy  their  Independence?    No;  the  standard 


346  THIS  ECONOMIC  WORLD 

of  living  will  take  care  of  the  laborer's  independence 
exactly  as  it  takes  care  of  his  wages.  If  the  standard  of 
living  is  low,  laborers  will  marry  and  multiply  even  if  it 
involves  both  a  lowering  of  wages  and  a  loss  of  independ- 
ence. But  where  the  standard  of  living  is  high,  they  will 
not  marry  until  they  are  both  well  paid  and  independent. 
A  high  standard  of  living  means  a  low  rate  of  multiplica- 
tion unless  general  economic  conditions  are  extraordi- 
narily good.  A  low  rate  of  multiplication  among  manual 
workers  means  a  scarcity  of  that  kind  of  labor  and  the 
maintenance  of  good  economic  conditions  among  them. 
Among  these  good  economic  conditions  we  must  include 
whatever  laborers  wholesomely  crave.  If  they  crave  in- 
dependence, that,  as  well  as  high  wages,  is  assured  by  a 
high  standard  of  living  which  will  retard  multiplication 
until  independence  is  secured. 

If  present  tendencies  continue — and  they  will  if  our 
scholars  are  astute  enough  to  point  the  way  and  our  states- 
men wise  enough  to  follow  their  teaching — there  is  no 
reason  why  labor  should  not  eventually  become  a  fixed 
charge  upon  industry,  and  capital  a  contingent  expense. 
Already  certain  high  salaries  are  fixed  charges.  Key  men 
must  be  retained  and  their  salaries  paid  regardless  of  the 
state  of  business.  More  and  more  kinds  of  labor  are  en- 
tering this  class.  During  the  last  winter  a  certain  manu- 
facturer of  soft  drinks  kept  his  force  of  truckdriver-sales- 
men  intact,  paying  the  men  wages  all  winter  when  many 
days  they  did  nothing  but  play  checkers.  The  reason  was 
not  benevolence  nor  a  Christian  spirit.  It  was  that  these 
men  would  be  so  hard  to  replace  in  the  spring  that  the 


AN  INDUSTRIAL  RESERVE  ARMY  347 

employer  did  not  dare  fire  them  for  the  winter.  If  there 
had  been  a  large  reserve  of  competent  men,  it  would  have 
been  cheaper  to  fire  in  the  fall  and  hire  in  the  spring. 
There  being  no  such  reserve,  it  was  cheaper  to  pay  these 
men  wages  even  when  there  was  no  work  for  them  than 
to  let  them  go.  The  next  thing,  of  course,  is  for  the  em- 
ployer to  find  something  for  these  men  to  do  during  the 
winter  months. 

This  is  a  condition  that  will  spread  to  all  classes  of 
labor  as  labor  becomes  more  and  more  scarce  relatively  to 
the  demand  for  it.  Any  kind  of  labor  may  become  a 
fixed  charge  when  it  is  scarce  enough  and  hard  enough  to 
find.  At  the  same  time,  if  capital  becomes  more  and  more 
abundant  it  will  eventually  cease  to  be  a  fixed  charge  or 
an  overhead  cost  in  the  strict  sense.  It  will  become  un- 
necessary to  guarantee  interest  to  the  capitalist,  and  he 
will  be  forced  to  take  his  chance  upon  a  contingent  in- 
come, receiving  dividends  or  profits  when  there  is  any- 
thing to  divide,  and  none  when  there  is  nothing  to  divide 
after  paying  wages  and  other  fixed  charges.  If  the  dispo- 
sition to  save  becomes  strong  enough,  men  will  accumu- 
late all  the  capital  that  is  needed  and  invest  it  on  the 
chance  of  dividends.  This  making  of  the  wage  bill  into  a 
fixed  charge  and  the  capital  account  into  a  contingent 
charge  is  not  contrary  to  but  in  strict  accord  with  the 
profits  systems.  It  is  the  profits  system  carried  to  its 
"logical  results,"  though  to  produce  these  logical  results 
will  require  more  intelligent  steering  and  rational  encour- 
agement. It  will  not  require  hostile  legislation,  but  in- 
telligent education,  the  encouragement  of  thrift,  the  occu- 


348  THIS  ECONOMIC  WORLD 

pational  redistribution  of  our  population  by  which  manual 
workers  are  thinned  out  and  more  and  more  high  intelli- 
gence is  concentrated  in  the  entrepreneurial,  managerial, 
technical,  and  capitalistic  occupations. 

Here  we  find  the  answer  to  the  question,  Will  not  the 
increase  of  saving  and  investing,  if  carried  far  enough,  re- 
sult in  general  overproduction?  Strictly  speaking,  gen- 
eral overproduction  is  a  logical  impossibility,  as  has  been 
shown  many  times.  What  is  really  meant  is.  Will  it  not 
throw  things  out  of  balance  by  providing  more  capital 
than  is  needed  to  produce  all  the  consumers'  goods  that 
men  will  buy?  If  men  generally  cut  down  their  purchases 
of  consumers'  goods  in  order  that  they  may  invest  more 
and  more  in  producers'  goods,  may  there  not  be  more 
producers'  goods  than  are  needed  to  supply  the  dimin- 
ished market  for  consumers'  goods?  That  unbalanced 
state  of  industry  which  some  have  mistakenly  called  gen- 
eral overproduction  is  a  real  possibility. 

But  the  first  symptom  of  an  approach  to  that  unbalanced 
condition  is  the  disappearance  of  pure,  or  net,  interest.* 

When  all  industries  are  equipped  with  all  the  capital 
that  they  need  to  supply  the  demands  of  consumers,  or,  in 
others  words,  when  they  have  all  the  equipment  that  the 
inventors  have  shown  them  how  to  use  economically,  no 
industry  will  then  be  willing  to  pay  interest  to  get  more 
capital.     Banks,  insurance  companies,  brokers,  and  pri- 

^  The  disappearance  of  pure,  or  net,  interest  would  not,  of  course,  en- 
able an  enterprise  of  dubious  solvency  to  borrow  without  contracting  to 
pay  interest.  It  would  still  be  necessary  to  overcome  the  owner's  prefer- 
ence for  keeping  his  money  in  a  safe  place  as  compared  with  letting  it  get 
out  of  his  control  in  a  hazardous  enterprise  or  a  doubtful  loan. 


AN  INDUSTRIAL  RESERVE  ARMY  349 

vate  investors  will  be  unable  to  place  safe  productive 
loans,  and  consequently  will  be  unable  to  pay  real  interest 
to  depositors,  patrons,  or  anyone  else.  Those  who  are 
fortunate  or  skillful  enough  to  pick  winners  in  the  form 
of  enterprisers  and  borrowers  will  pay  dividends;  others 
will  not.  The  entire  income  from  capital  would  be  of  that 
sort,  and,  the  losses  tending  to  balance  the  gains,  the  In- 
come of  the  capitalist  class  would  tend  to  disappear.  In 
those  establishments  where  the  returns  to  investors  are 
negative,  that  is,  those  whose  owners  do  not  get  even  their 
principal  back,  the  other  participants  get  more  than  the 
total  product.  Where  these  losses  equal  the  gains  made 
in  other  establishments  there  is  no  net  income  for  capital- 
ists as  a  class.  In  fact,  we  are  much  nearer  that  condition 
today  than  most  of  us  are  aware. 

Now,  when  the  income  of  the  capitalist  class  disap- 
pears, it  means  that  other  classes  get  the  entire  product  of 
industry.  These  include  the  receivers  of  profits,  of  sal- 
aries, of  wages,  and  of  rent.  The  profits  of  enterprisers 
as  a  class  tend  to  cancel  in  so  far  as  the  losses  balance  the 
gains  under  the  same  conditions  and  for  the  same  reasons 
as  cause  the  disappearance  of  net  interest.  A  considerable 
increase  in  the  number  of  enterprisers  watching  for  oppor- 
tunities tends  to  increase  the  intensity  of  the  competition 
among  themselves  and  to  increase  the  losses  and  decrease 
the  gains  until  the  cancellation  Is  complete.  This  tends  to 
concentrate  the  total  national  income  into  the  two  classes, 
rent,  and  salaries  and  wages.  Rent  I  prefer  not  to  dis- 
cuss, because  it  is  not  claimed  by  anyone,  so  far  as  I  know, 
that  an  Industrial  reserve  army  is  essential  to  Its  existence. 


350  THIS  ECONOMIC  WORLD 

There  is  still  one  problem,  as  yet  unsolved,  the  solution 
of  which  is  essential  to  the  final  elimination  of  the  last 
vestige  of  the  possibility  of  an  industrial  reserve  army: 
that  is  the  problem  of  the  feeble-minded.  Among  the  in- 
telligent, the  development  of  a  high  standard  of  living  is  a 
complete  safeguard  against  an  oversupply  of  labor;  but  a 
high  standard  of  living  is  impossible  among  the  unintelli- 
gent who  are  not  capable  of  exercising  forethought.  With 
them,  their  habits  or  tastes,  no  matter  how  expensive,  do 
not  and  cannot  in  any  way  affect  their  marriage  rates  and 
birth  rates  and  therefore  do  not  constitute  a  true  standard 
of  living.^  With  them,  reproduction  is  a  biological  proc- 
ess, uncontrolled  by  rational  purpose.  Being  a  biological 
process  as  it  is  with  plants  and  animals,  nothing  short  of 
physical  control  will  check  their  multiplication.  Without 
physical  control,  the  feeble-minded,  given  time  enough, 
can  overstock  any  market  with  low-grade,  unskilled  labor. 
Consequently,  we  must  manage  to  control  them  if  we  ever 
hope  to  prevent  permanently  the  development  of  a  mass 
of  poverty. 

But,  let  it  be  remembered,  this  reproductive  propensity 
of  the  feeble-minded  is  not  the  result  of  the  profits  system. 
It  would  exist  under  communism  or  any  other  system,  and 
the  same  necessity  for  control  would  exist  under  any  sys- 
tem. But  if  it  is  not  controlled,  and  if  we  continue  to 
breed  morons,  the  profit  takers  and  many  others  will  man- 
age to  make  productive  use  of  them.  Again,  profit  takers 
are  not  different  from  the  rest  of  us.  Housewives  will 
hire  morons  to  do  housework,  farmers  will  hire  them  to 


^  See  the  author's  Principles  of  National  Economy  (Boston,  1921),  p.  500. 


AN  INDUSTRIAL  RESERVE  ARMY  351 

do  farm  work,  artists  and  others  to  relieve  themselves  of 
hack  work,  with  even  more  avidity  than  enterprisers  will 
hire  them  to  work  in  factories. 

To  conclude.  If  we  can  maintain  the  democratic  tradi- 
tion that  business  is  just  as  respectable  as  any  other  call- 
ing, if  we  can  continue  to  show  a  generous  appreciation 
of  those  who  succeed  in  building  up  great  business  enter- 
prises, if  our  higher  institutions  of  learning  can  continue 
to  train  men  for  business  as  well  as  for  the  professions  to 
which  the  word  "learned"  was  formerly  restricted,  if  all 
our  schools  can  continue  to  move  men  upward  in  the  scale 
of  occupations,  if  we  can  continue  to  restrict  the  immigra- 
tion of  low-wage  labor,  adding  Mexican  labor  to  the  kind 
that  is  to  be  restricted,  if  we  can  continue  to  maintain  re- 
sponsible parenthood  among  the  intelligent  classes,  and  if 
we  can  manage  in  some  way  to  limit  the  multiplication  of 
the  mentally  weak,  we  can  not  only  eliminate  the  indus- 
trial reserve  army,  but  can  diffuse  prosperity  more  and 
more  evenly  among  all  classes,  and  we  can  put  all  laborers 
in  a  position  of  independence  quite  equal  to  that  of  the 
employing  classes. 


XI 


THE  INVENTOR  AND  THE  INVESTORS 

THERE  are  not  many  economic  problems  that  can  be 
discussed  intelligently  without  considering  comple- 
mentary factors  or  agents  of  production.  These  are  com- 
monly likened  to  the  two  blades  of  a  pair  of  scissors,  or 
the  upper  and  nether  millstones,  either  one  being  useless 
without  the  other.  Amateurs  are  frequently  puzzled  by 
this  mutual  interdependence.  Sometimes  they  fall  into 
the  error  of  attributing  the  entire  product  to  one  factor 
alone,  because,  forsooth,  without  it  there  would  be  no 
product  at  all.  Labor,  for  example,  is  said  to  produce 
all  wealth  because  without  it  not  anything  could  be  pro- 
duced. That  is  like  saying  that  the  upper  blade  of  the 
scissors  does  all  the  cutting,  or  the  upper  millstone  all  the 
grinding,  because  no  cutting  or  grinding  could  be  done 
without  it. 

Among  the  more  sophisticated,  another  error,  almost 
equally  fatal,  is  made.  It  is  easily  seen  that  one  factor 
is  quite  as  important  as  the  other,  but  since  both  are  ab- 
solutely necessary,  it  is  claimed  that  it  is  useless  to  discuss 
their  relative  importance.  That  is,  of  course,  true  enough, 
but  it  does  not  exhaust  the  subject.    Suppose  one  blade  of 

^  This  chapter  was  published  as  an  article  by  T.  N.  Carver  in  Capital 
and  Surplus,  American  Institute  of  Banking,  Detroit  Chapter,  December, 
1926,  and  is  reproduced  by  permission. 

352 


THE  INVENTOR  AND  THE  INVESTOR       353 

the  scissors  was  short,  dull,  or  otherwise  defective  while 
the  other  was  good  enough.  There  would  not  be  much 
gain  in  still  further  improving  the  good  blade  while  leav- 
ing the  defective  one  unrepaired.  While  one  blade,  con- 
sidered in  itself,  might  be  just  as  important  as  the  other, 
it  is  much  more  important,  nevertheless,  that  the  defective 
blade  should  be  repaired  than  that  the  good  one  should 
be  improved.  The  maximum  economy  of  effort  requires 
that  effort  be  expended  where  it  is  most  needed. 

Or,  if  we  choose  a  somewhat  more  realistic  illustration, 
crust  is  just  as  necessary  as  filling  in  the  making  of  pie, 
but  if  the  crust  is  too  thick  for  the  filling,  or  the  filling 
too  thin  for  the  crust,  it  is  more  important  that  the  pie- 
maker  should  use  more  filling  than  that  she  should  use 
more  crust.  Again,  if,  in  the  entire  pie  belt  there  is  an 
abundance  of  material  for  the  making  of  crust  and  a 
scarcity  of  material  for  the  making  of  filling,  it  is  more 
important,  from  the  standpoint  of  human  happiness,  that 
men  should  get  busy  producing  more  filling  than  that  they 
should  get  busy  producing  more  crust.  One  way  to  in- 
duce them  to  produce  more  filling  and  less  crust  is  to  pay 
them  more  for  their  work  In  one  case  than  in  the  other. 
A  thousand  other  illustrations  of  the  same  principle  could 
be  given  if  they  were  necessary. 

It  is  the  thesis  of  this  chapter  that  the  inventor  and  the 
investor  fit  together  like  the  two  blades  of  the  scissors, 
the  upper  and  the  nether  millstone,  or  the  crust  and  the 
filling  of  pie.  Without  the  inventor  there  would  not  be 
many  opportunities  for  investment,  and  without  the  in- 
vestor there  would  not  be  much  of  a  market  for  inventors. 


354  THIS  ECONOMIC  WORLD 

To  show  how  dependent  the  investors  are  upon  the  in- 
ventors, let  us  consider  for  a  moment  what  rich  men,  If 
there  were   any,   could  do  with  their  wealth,   or  what 
forms  their  wealth  could  take  on,  if  there  had  been  no 
mechanical  inventions.     Some  light  may  be  thrown  on 
the  question  by  considering  what  rich  men  did  with  their 
wealth  or  what  form  it  took  before  the  days  of  mechan- 
ical inventions,  or  what  they  do  now  in  countries  where 
mechanical  inventions  do  not  play  a  large  part  in  Industry. 
What,  for  example,  does  an  Oriental  prince  do  with 
his  wealth,  or  what  forms  of  material  wealth  can  he  own? 
Of  course,  a  modern  accountant  might  capitalize  the  ty- 
rant's power  to  extort  tribute  from  his  subjects  and  call 
that  capitalized  sum  his  wealth;  but  that  sum  would  not 
be  embodied  in  any  list  of  material  objects.     If  he  con- 
sumed all  his  income  in  riotous  living,  there  would  be  no 
list  of  durable  material  objects  that  could  be  listed  under 
the  name  of  wealth.    If  he  does  not  consume  his  whole  in- 
come in  the  form  of  ephemeral  satisfactions,  what  durable 
forms  of  material  wealth  are  available?    Lands,  palaces, 
hoards  of  precious  metals  or  jewels,  and  rich  fabrics  prac- 
tically exhaust  the  category.     The  private  citizen  of  a 
community  in  which  there  were  no  mechanical  inventions 
and  therefore  no  expensive  manufacturing  plants,  not  hav- 
ing the  power  to  collect  tribute,  would  be  limited  to  those 
few  forms  of  wealth.     Even  if  he  were  a  merchant  he 
could  not  be  very  rich,  that  is,  he  could  not  own  objects 
of  great  value  except  stocks  of  valuable  merchandise  such 
as  gold,  silver,  jewels,  and  rich  fabrics. 

In  western  .countries,  before  the  age  of  mechanical  in- 


THE  INVENTOR  AND  THE  INVESTOR       355 

ventions,  the  same  conditions  held.  Land  was  the  most 
important  form  of  durable  wealth,  and  the  wealthy 
classes  were,  in  the  main,  landowners.  Next  came  ships 
and  merchandise,  but  ships  are  mechanical  inventions  of  a 
special  kind,  and  the  only  kinds  of  merchandise  that  em- 
bodied great  riches  were,  here  as  in  Oriental  countries, 
objects  of  great  value  in  small  bulk. 

Since  the  age  of  mechanical  invention,  however,  capital 
has  come  to  play  a  vastly  larger  part  in  the  economic  life 
of  western  peoples,  and  our  richest  men  are  no  longer 
landowners  or  merchants,  but  capitalists  in  a  newer  sense. 
Capital  now  consists  mainly  in  mechanical  instruments  of 
production — factories  of  all  kinds,  railroads,  steamships 
— and  capitalists  are  mainly  owners  of  such  things.  The 
joint  stock  system  of  ownership  makes  it  easy  for  vast 
numbers  to  become  owners  of  such  things;  in  short,  to 
become  capitalists. 

To  show  on  the  other  side  of  the  question  the  depend- 
ence of  the  inventor  upon  the  investor,  we  need  only  to 
consider  what  an  inventor  would  do  with  his  invention 
unless  he  or  someone  else  was  able  to  pay  the  cost  of  mak- 
ing it  and  to  wait  for  it  to  repay  that  cost  through  its 
superior  productivity.  If  he  is  able  to  do  that  himself, 
he  is  his  own  capitalist-investor.  If  he  is  not,  he  must 
find  someone  else  who  is.  If  neither  he  nor  anyone  else 
is  able  or  willing  to  pay  the  initial  cost  and  wait  for  a  re- 
turn, his  invention  will  be  useless,  both  to  himself  and 
to  the  world.  Any  movement,  whether  It  be  a  thrift  cam- 
paign, a  program  for  the  safeguarding  of  small  investors 
against  the  machinations  of  large  shareholders  or  boards 


356  THIS  ECONOMIC  WORLD 

of  directors,  or  a  blue  sky  law,  which  encourages  men  and 
women  to  save  and  invest  their  money,  automatically  ex- 
pands the  market  for  productive  inventions.  Conversely, 
any  movement  for  the  discouragement  of  thrift  and  in- 
vestment automatically  contracts  that  market. 

If  I  were  a  great  capitalist  and  possessed  no  moral 
scruples  whatsoever,  being  solely  desirous  of  increasing 
my  power  or  of  clinching  my  grip  upon  the  industrial 
system,  I  would  deliberately  start  a  comprehensive  cam- 
paign for  the  discouragement  of  thrift  and  the  encourage- 
ment of  hand-to-mouth  extravagance.  I  would  found  In- 
stitutes of  Extravagance  to  teach  the  virtues  of  lavish 
consumption  and  Installment  buying,  I  would  subsidize 
the  publication  of  books  on  the  Fallacy  of  Thrift,  I  would 
buy  controlling  Interests  In  both  popular  and  highbrow 
magazines  and  encourage  the  editorial  policy  of  publish- 
ing articles  on  the  Dilemma  of  Saving,  all  to  the  end  that 
the  number  of  my  potential  competitors,  the  Investors, 
should  decrease.  If  I  should  be  successful  in  my  cam- 
paign, I  would  have  an  easy  time  of  It.  Every  inventor 
would  then  have  to  come  to  me  to  get  me  to  finance  his 
invention,  and  I  could  then  dictate  terms,  whereas,  if  there 
were  thousands  of  other  capitalists  looking  for  opportuni- 
ties to  invest  their  capital,  I  could  not.  If  I  should  be 
successful  in  my  campaign,  every  promoter  of  a  new  In- 
dustry requiring  capital  would  have  to  come  to  me.  I 
could  then  not  only  control  him,  but  I  alone  should  have 
the  power  to  say  what  industries  should  start  and  what 
should  not,  whereas  if  I  had  thousands  of  competitors  my 
power  would  be  shorn.    If  I  should  be  successful,  in  short, 


THE  INVENTOR  AND  THE  INVESTOR       357 

everyone  who  needed  capital  for  any  purpose  would  be- 
come my  subject,  whereas,  if  there  were  thousands  of 
other  capitalists,  I  would  have  no  more  power  than  the 
common  laborer  when  labor  is  scarce. 

Were  it  not  for  the  serious  consequences  which  might 
follow,  this  form  of  propaganda  should  be  taken  about  as 
seriously  as  propaganda  against  the  safety  razor  by  a  bar- 
ber,  against  electric  washing  machines  by  a  laundry  man, 
or  against  improved  sanitation  by  a  low-grade  physician. 
A  capitalist  who  opposed  thrift  should  be  classified  with 
those  enemies  of  American  labor  who  oppose  the  restric- 
tion of  immigration  or  the  control  of  the  birth  rate  among 
the  poor.  The  latter  campaign  is  not  so  very  dangerous 
because  most  people  see  through  it.  It  is  easy  to  see  that 
unrestricted  immigration  or  a  high  birth  rate  among  wage 
workers  would  flood  our  labor  market,  reduce  wages,  and 
put  our  wage  workers  generally  at  a  disadvantage  and 
their  employers  at  an  advantage.  Many  people  do  not 
yet  see  the  equally  patent  fact  that  diminution  of  thrift 
would  produce  the  same  results,  that  it  would  change  the 
ratio  between  labor  and  capital,  not  by  increasing  the 
number  of  laborers  but  by  decreasing  the  amount  of  capi- 
tal. Consequently,  the  promoters  of  extravagance  and  a 
diminution  of  capital  are  more  dangerous,  because  more 
plausible,  than  the  promoters  of  an  oversupply  of  labor. 

Even  a  laborer  can  be  a  dictator  whenever  he  is  the 
only  one  who  can  do  a  certain  necessary  kind  of  work. 
The  only  thing  that  keeps  him  from  being  a  dictator  is  the 
fact  that  he  has  too  many  competitors.  The  capitalist's 
power  is  diminished  by  the  same  fact  wherever  it  exists. 


3S8  THIS  ECONOMIC  WORLD 

Wherever  capital  and  capitalists  are  scarce  relatively  to 
the  need  for  them,  their  power  is  great.  Wherever  they 
are  abundant  relatively  to  the  need  for  them,  their  power 
is  gone. 

"The  obvious  is  always  overlooked  until  it  is  pre- 
sented as  the  unusual."  Men  and  women  have  labored 
to  show  how  capitalism  is  being  remade  by  a  new  religious 
spirit  that  is  entering  the  hearts  of  capitalists.  Perhaps 
there  is  something  in  that  idea,  but  it  is  not  where  most 
of  these  writers  think  it  is.  A  puritanic  religion  which 
discourages  luxury  and  riotous  living  makes  it  easy  to 
save  and  accumulate  capital.  In  a  country  where  Puri- 
tanism, Quakerism,  or  Methodism  is  influential,  men  do 
not  gain  prestige  by  lavish  expenditure  or  conspicuous 
waste.  As  they  accumulate  wealth,  there  is  not  much 
encouragement  to  turn  to  a  life  of  ease  and  luxury.  This 
means  more  and  more  accumulation  of  capital. 

This  accumulation,  in  turn,  makes  it  harder  and  harder 
for  the  capitalist  to  invest  his  capital.  This  forces  him 
to  do  several  things  that  make  for  progress.  First,  he 
must  encourage  the  invention  of  new  mechanical  con- 
trivances for  saving  labor.  That  is,  he  must  be  on  the 
lookout  for  promising  inventions.  This  furnishes  a  good 
market  for  the  real  inventor  who  has  anything  genuine 
to  offer.  It  is  no  accident,  therefore,  that  inventions  in- 
crease as  capital  increases,  and  vice  versa. 

Second,  in  order  to  find  avenues  for  the  investment  of 
capital,  interest  rates  must  fall,  unless  the  mechanical  in- 
ventors more  than  keep  pace  with  the  accumulators.  It 
is  possible,  of  course,  that  interest  rates  may  rise  while 


THE  INVENTOR  AND  THE  INVESTOR       359 

the  supply  of  capital  Is  Increasing,  but  that  can  be  only 
where  Inventors  are  presenting  so  many  new  opportuni- 
ties for  the  Investment  of  capital  that  even  the  increasing 
supply  of  capital  cannot  keep  up,  or  when  inventors  In 
such  numbers  are  looking  for  capitalists  to  finance  their 
inventions  as  to  create  a  demand  for  more  capital  than  is 
being  supplied.  But,  If  capital  accumulates  rapidly  enough 
to  more  than  meet  that  demand,  Interest  rates  must  fall. 

Third,  when  capital  is  expanding  and  inventions  in- 
creasing, Industry  grows  in  magnitude  and  efficiency,  and 
human  wants  and  desires  are  more  and  more  abundantly 
supplied.  If  the  expansion  of  industry  is  universal  and 
well  balanced,  there  is  no  such  thing  as  general  overpro- 
duction until  interest  on  capital  disappears  altogether. 
The  first  symptom  of  that  hypothetical  state  of  general 
overproduction  is  the  disappearance  of  interest.  W^hen 
there  Is  more  capital  seeking  productive  Investments  than 
can  find  opportunities  with  the  existing  demand  for  com- 
modities, this  sheer  oversupply  of  capital  and  the  com- 
petition among  the  owners  of  capital  for  some  return,  or 
to  avoid  complete  unemployment  for  their  capital  with  no 
return  at  all,  will  reduce  net  Interest  to  the  vanishing  point. 
Such  interest  as  one  would  then  have  to  pay  would  not  be 
true  interest  but  only  enough  to  overcome  the  fear  of  loss 
— that  is,  risk. 

Fourth,  unless  laborers  should  increase  more  rapidly 
than  the  demand  for  them,  wages  would  automatically 
rise,  not  directly  because  of  a  Christian  spirit  on  the  part 
of  employers,  but  because  the  labor  market  would  be  so 
improved  as  to  raise  the  price  of  labor.     Indirectly,  if 


36o  THIS  ECONOMIC  WORLD 

a  Christian  spirit  discouraged  luxury  and  ease,  this  would 
encourage  accumulation  and  this,  in  turn,  would  so  im- 
prove the  labor  market  as  to  raise  the  price  of  labor. 
Non-Christians,  pagans,  atheists,  and  Gradgrinds  would 
all  alike  have  to  pay  the  high  wages. 

The  surest  way  to  raise  wages,  equalize  wealth,  emanci- 
pate the  laborer  from  the  necessity  of  taking  the  first  job 
that  offered  (or  of  holding  on  to  a  present  job  for  fear  of 
not  getting  another)  by  giving  him  several  good  jobs  to 
choose  from  and  by  making  him  quite  as  free  as  a  capital- 
ist, is  to  encourage  the  accumulation  of  capital  by  increas- 
ing numbers  of  capitalists  on  the  one  hand,  and  on  the 
other  to  thin  out  the  ranks  of  laborers  that  are  now  poorly 
paid,  by  providing  educational  opportunities  that  will 
enable  the  rising  generation  to  avoid  all  poorly  paid  occu- 
pations and  find  their  way  into  those  that  are  well  paid. 
With  capital  and  enterprise  enough,  all  may  be  well  paid, 
and  about  equally  well  paid  except  where  exceptional 
ability  or  exceptional  stupidity  would  justify  some  differ- 
ence. 


XII 

THE  LAST  FIFTY  YEARS  IN  THE 
UNITED  STATES! 

A  GOOD  working  definition  of  civilization  is  the  art 
of  living  together  comfortably  in  large  numbers. 
Numbers  can  be  counted,  but  what  constitutes  a  comfort- 
able living  is  largely  a  matter  of  opinion.  Opinions  on 
this  subject  fall  into  three  main  groups:  first,  that  living 
comfortably  means  having  an  abundance  of  material 
goods;  second,  that  it  consists  in  having  abundant  leisure; 
third,  that  it  consists  in  having  many  children.  Where  the 
first  of  these  three  opinions  prevails,  people  take  their 
progress  in  the  form  of  more  and  more  goods;  where  the 
second  prevails,  they  take  it  in  the  form  of  more  and 
more  leisure,  where  the  third  prevails,  they  take  it  in 
the  form  of  larger  and  larger  families.  We  in  the  United 
States  take  ours  mainly  in  the  form  of  goods ;  the  Central 
American  peon  takes  his  in  the  form  of  leisure;  the  people 
of  China  and  India  take  theirs  in  the  form  of  numbers. 
Which  is  the  superior  type  of  civilization  could  be  argued 
for  a  long  time  and  with  many  words. 

We  are  accustomed  In  this  country,  at  least  since  1876, 
to  measure  our  progress  mainly  in  terms  of  material 
wealth,  though  we  are  also  somewhat  proud  of  our  num- 

^  A  part  of  this  chapter  was  published  as  an  article  by  T.  N.  Carver  in 
the  World's  fVork  for  July,  1926,  and  is  reprinted  by  permission. 

361 


362 


THIS  ECONOMIC  WORLD 


bers.  Leisure  Is  not  highly  esteemed.  Before  the  Cen- 
tennial Exposition,  our  chief  sources  of  pride  and  the  chief 
themes  for  patriotic  oratory  were  our  vast  area,  our  po- 
litical system  with  its  absence  of  kings  and  aristocrats,  our 
free  schools,  and  the  fact  that  we,  more  than  any  other 
country,  had  removed  all  handicaps  upon  individual 
achievement.  As  a  result  of  this  unshackling  of  the  hu- 
man spirit,  every  person  has  been  encouraged  to  make  the 
most  of  himself,  and  this  has  resulted  In  unparalleled 
progress  In  the  production  and  enjoyment  of  material 
goods.  We  are  now  beginning  to  take  pride  In  these 
goods  rather  than  the  ideals  that  made  them  possible,  in 
the  things  that  have  been  added  unto  us  rather  than  In 
the  things  we  really  sought. 

And  many  things  have  been  added  unto  us. 

The  total  wealth  of  the  United  States,  estimated  on  a 
gold  basis,  from  1870  to  1922,  Is  as  follows: 


Year 

Total  Amount 

Amount  per  Capita 

1870 

1880 

1890 

1900 

1904 

1912 

1922 

$  24,055,000,000 
43,642,000,000 
65,037,000,000 
88,517,000,000 

1 07, 1 04 ,000, (XX) 

186,300,000,000 
320,804,000,000 

$   624 
870 
1,036 
1,165 
1.318 
1,950 
2,918 

Some  allowance  must  be  made,  however,  for  the  cheap- 
ening of  gold  or  the  decline  In  the  purchasing  power  of 
the  dollar.  Estimates  vary  as  to  just  how  much  cheaper 
gold  was  In  .1922  than  In  1870,  but  50%  Is  a  reasonable 
estimate.     Estimated  on  this  basis,  the  national  wealth 


THE  LAST  FIFTY  YEARS  363 

increased  more  than  six  times  from  1870  to  1922,  and  the 
per  capita  wealth  two  and  one-third  times. 

The  Bankers  Trust  Company  estimates  the  per  capita 
wealth  in  1923  of  Great  Britain  to  have  been  $1,489,  of 
France,  $1,484,  of  Germany,  $901.  Not  only  do  we  seem 
to  be  the  richest  country  in  the  world,  but  our  per  capita 
wealth  is  appreciably  higher  than  that  of  our  nearest 
rivals. 

These  vast  accumulations  of  goods  are  at  least  an  index 
of  our  mastery  over  material  forces,  of  our  ability  to  har- 
ness them  to  our  purposes  and  make  them  do  our  bidding. 
If  fault  is  found,  it  must  be  with  the  nature  of  our  desires, 
or  with  the  things  which  we  choose  to  produce  with  our 
industrial  system.  When  we  change  our  desires,  whether 
in  the  direction  of  preferring  leisure  to  goods,  or  of  pre- 
ferring different  kinds  of  goods,  our  highly  efficient  indus- 
trial system  will  enable  us  to  satisfy  the  new  desires  quite 
as  well  as  it  now  enables  us  to  satisfy  our  present  desires. 
If  we  were  willing  to  live  today  as  our  people  lived  in 
1876,  that  Is,  with  the  same  material  comforts,  we  could 
doubtless  get  along  with  four  hours'  work  a  day.  This 
would  give  us  a  great  deal  of  leisure.  But  should  we  like 
it  as  well  as  we  now  like  an  abundance  of  goods  and  no 
great  amount  of  leisure?  Probably  not.  We  need  not 
feel  depressed,  as  John  Stuart  Mill  did,  with  the  thought 
that  our  mechanical  improvements  have  not  shortened 
the  hours  of  labor,  so  long  as  the  people  generally  are  get- 
ting what  they  seem  to  want. 

The  population  increased  from  1876  to  1925  according 
to  the  following  table : 


364  THIS  ECONOMIC  WORLD 

1876 45,137,000     1900 76,120,408 

1880 50,155.783       igio 92,367,080 

1800 62,947,714       1920 106,418,17s 

192S 113,493,720 

In  considering  the  population  question,  some  account 
must  be  taken  of  immigration.  Down  to  the  very  out- 
break of  the  World  War  immigration  was  increasing,  as 
shown  by  the  following  table : 

Years  Total  Immigrants 

1871-18S0 2,812,191 

1881-1890 5,246,613 

1891-1900 3,687,564 

1901-1910 8,795,386 

1911-1920 5,735,811 

1920-1924 2,774,600 

Most  of  the  increase  during  the  decade  from  191 1  to 
1920  came  before  1915.  In  1913  there  were  1,197,892 
immigrants  admitted  to  this  country;  in  1914  there  were 
1,218,480,  that  being  the  largest  number  ever  received  in 
one  year.  This  shows  very  clearly  that  immigration  did 
not  fall  off  but  continued  to  increase  after  the  exhaustion 
of  the  free  public  lands.  The  high  wages  paid  in  large 
industrial  centers  proved  even  more  attractive  than  the 
free  public  lands  had  ever  been,  if  we  may  judge  by  the 
numbers  that  came. 

A  more  encouraging  factor  in  our  increase  of  numbers, 
indicating  as  it  does  a  growing  mastery  over  the  dread 
enemy,  disease,  is  the  decline  in  the  death  rate.  In  1880, 
in  those  areas  where  records  were  kept,  the  death  rate 
was  19.8  per  1000.     Since  that  date  the  rate  has  steadily 


THE  LAST  FIFTY  YEARS  365 

fallen  until  in  1924  it  was  11.9.     The  figures  by  decades 
are  as  follows: 

1880 19.8     1910 iS-o 

1890 19.6     1920 13.1 

1900 17.6     1924 11.9 

Even  more  important  than  the  total  population  is  the 
quality  of  our  population.  The  best  index  of  this  is  the 
effort  that  is  being  made  to  improve  the  quality  of  public 
education.  The  figures  on  page  366  show,  roughly,  the 
increasing  efforts  that  we  are  making  in  this  direction. 

These  increasing  expenditures  for  public  education  are 
a  part  of  our  endeavor  to  realize  the  great  ideal  of  equal 
opportunity  for  all.  There  is  no  monopoly  so  dangerous 
as  a  monopoly  of  knowledge,  and  nothing  so  effectually 
destroys  that  monopoly  as  the  diffusion  of  knowledge. 
The  greatest  stimulus  that  can  be  given  to  the  human 
spirit  is  to  serve  notice  upon  it  that  its  achievements  are 
to  be  limited  solely  by  its  own  native  power,  supplemented 
by  its  own  efforts,  that  neither  birth  nor  family  prestige 
will  count  for  much,  and  that  humble  birth  and  lack  of 
prestige  are  no  handicap  to  the  person  of  ability  and  in- 
dustry. This  has  made  the  typical  American  a  model  of 
energy.  Our  public  school  system  has  provided  him  with 
a  free  chance  to  train  whatever  native  ability  he  possessed. 
Our  people  have  responded  to  these  stimuli  and  have 
thrown  themselves  into  their  life  work  with  an  enthusiasm 
that  cannot  be  matched  anyhere  else. 

Our  people  are  commonly  regarded  as  somewhat  ex- 
travagant in  the  spending  of  money,  but  they  are  ex- 


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THE  LAST  FIFTY  YEARS  367 

tremely  penurious  In  the  matter  of  time.  We  are  always 
trying  to  save  time,  even  if  we  have  to  spend  money  in 
doing  it;  witness  the  vast  scale  on  which  we  have  intro- 
duced labor-  and  time-saving  devices,  not  only  in  our  fac- 
tories but  also  In  our  households.  More  than  half  of  all 
the  telephones  in  the  world  are  In  the  United  States. 
Electric  household  devices  of  all  kinds  are  increasing 
rapidly;  the  manufacture  of  such  things  is  one  of  the 
growing  Industries. 

We  are  sometimes  accused  of  being  dollar-chasers  by 
the  very  people  who  accuse  us  of  being  extravagant  In 
spending  money.  But  In  no  country  do  men  give  money 
on  such  a  lavish  scale  to  educational,  charitable,  and  pub- 
lic enterprises  as  here.  We  have  167  colleges  and  uni- 
versities each  with  an  endowment  of  one  million  dollars 
or  more.  During  the  decade  1910  to  1920,  the  value  of 
college  and  university  buildings  rose  in  round  numbers 
from  211  millions  to  425  millions,  the  value  of  dormitories 
from  17  millions  to  69  millions,  and  the  amount  of  produc- 
tive funds  from  259  millions  to  556  millions. 

Correlated  with  this  increase  of  material  equipment  and 
productive  funds  Is  an  increase,  over  many  years,  of  the 
number  of  Instructors  and  students  in  our  colleges.  In 
1890  the  teaching  staffs  numbered  7,918;  In  1900,  18,220; 
in  1910,  24,667;  In  1920,  42,882.  In  1890  the  students 
numbered  156,449;  in  1900,  197,163;  in  1910,  274,084;  in 
1920,  521,754- 

These  abundant  opportunities  for  higher  education  are 
also  a  part  of  our  general  policy  of  a  free  chance  for  all. 
Our  whole  educational  system,  from  the  primary  grades 


368  THIS  ECONOMIC  WORLD 

to  the  graduate  and  professional  schools,  tends  to  move 
men  upward  in  the  economic  scale.  This  automatically 
thins  out  the  lower  occupations  where  wages  in  the  past 
have  been  chronically  low,  and  this,  in  turn,  tends  to  make 
wages  in  those  occupations  higher  than  they  have  ever 
been  before. 

As  a  consequence  of  our  democratic  ideal  of  free  op- 
portunity for  all  and  special  favors  for  none,  as  expressed 
in  our  educational  system,  this  has  always  been  a  good 
country  for  the  worker.  This  is  shown  objectively  by  the 
vast  scale  on  which  workers  from  other  parts  of  the  world 
sought  this  country.  In  the  earlier  years,  to  be  sure,  they 
came  largely  because  of  the  lure  of  free  land.  In  a 
special  sense,  therefore,  we  may  attribute  their  coming 
to  our  rich  natural  resources,  especially  our  vast  areas  of 
agricultural  land.  It  must  be  observed,  however,  that 
rich  natural  resources  may  be  used  in  such  ways  as  to  con- 
centrate rather  than  to  diffuse  prosperity.  It  would  have 
been  easy,  for  example,  to  sell  the  public  land  in  large 
tracts  or  give  It  in  large  grants  to  a  few  wealthy  land- 
owners. Rural  America  would  then  have  consisted  of  a 
limited  number  of  vast  estates,  owned  by  one  class  and 
worked  by  another.  In  a  few  of  the  earlier  American 
colonies  this  system  developed,  but  it  could  not  endure 
long  under  the  democratic  principles  on  which  the  War 
of  Independence  was  fought  and  the  new  government  con- 
stituted. 

As  observed  above,  immigrants  came  in  even  larger 
numbers  after  the  free  public  lands  were  exhausted.  They 
have  been  attracted  by  the  ample  opportunities  for  em- 


THE  LAST  FIFTY  YEARS  369 

ployment  at  wages  that  were  definitely  higher  than  in 
other  countries,  and  this  abundance  of  employment  at 
relatively  good  wages  was  the  result  of  our  industrial  ex- 
pansion. There  was  a  distinct  upward  bend  in  the  curve 
of  immigration  statistics  in  the  year  1880,  four  years  after 
the  Centennial  Exposition. 

All  students  agree  that  the  Centennial  Exposition  is  a 
landmark  in  our  industrial  history.  It,  for  the  first  time, 
gave  millions  of  Americans,  from  all  parts  of  the  country, 
an  idea  of  our  industrial  possibilities.  Besides,  it  not  only 
educated  the  people,  but  it  stimulated  their  desire  for  new 
articles  of  all  kinds.  It  turned  the  attention  of  statesmen, 
voters,  and  politicians  toward  the  industrial  problems  of 
the  future  rather  than  toward  the  constitutional  and  po- 
litical problems  of  the  past.  The  presidential  campaign 
of  1876  was  the  last  that  was  definitely  waged  on  the  old 
political  issues  growing  out  of  slavery  and  the  Civil  War. 
The  next  few  campaigns  were  waged  primarily  on  eco- 
nomic questions,  such  as  the  tariff  problem,  monetary  and 
banking  reform,  conservation,  and  the  control  of  "trusts." 
The  campaigns  may  not  have  decided  anything  very  im- 
portant, but  they  were  at  least  an  indication  of  the  sub- 
jects on  which  the  people  were  thinking,  and  that  is  a 
matter  of  the  very  greatest  importance. 

Of  course,  no  one  who  understands  the  question  would 
have  expected  any  considerable  rise  in  wages  during  the 
period  of  free  immigration.  The  expansion  of  the  de- 
mand for  labor  was  a  good  thing  for  labor  in  general,  but 
the  advantage  went  mostly  to  the  newly  arrived  immi- 
grants and  not  to  the  laborers  who  were  already  here. 


370  THIS  ECONOMIC  WORLD 

The  newly  arrived  immigrants  were  enabled  to  get  higher 
wages  than  they  had  ever  had  before,  and  they  were  put 
on  the  road  to  prosperity.  The  native-born  laborers 
found  their  progress  somewhat  retarded  by  the  new  com- 
petitors, and  in  their  progress  upward  they  had  to  keep 
step  with  the  immigrant  laborers.  Since  the  restriction  of 
immigration  there  has  been  a  positive  advance  in  wages. 
The  advance  between  1914  and  1924  has  been  variously 
estimated  at  from  28%  to  40%.  Most  of  this  advance 
has  come  since  1918.  The  International  Labour  Review 
published  in  January,  1926,  an  index  of  real  wages — that 
is,  the  purchasing  power  of  the  money  wages  in  terms  of 
food — in  a. number  of  cities  selected  from  different  coun- 
tries. Each  city  is  taken  as  a  sample  of  the  whole  country 
in  which  it  is  located,  Philadelphia  being  the  American 
city  that  was  chosen.  On  October  i,  1925,  the  relative 
wages  ran  as  follows,  the  wages  of  London  on  July  i, 
1924,  being  taken  as  100  per  cent. 

City  Wages 

Philadelphia 176 

Ottawa 158 

Sydney 133 

Copenhagen 109 

London 94 

Stockholm 82 

Amsterdam 81 

Berlin 65 

The  Avide  diffusion  of  our  prosperity  is  evidenced  fur- 
ther by  the  scale  on  which  our  people  are  buying  what  a 
previous  generation  would  have  called  luxuries,  and  also 
by  the  scale  oh  which  they  are  saving  and  investing  their 


THE  LAST  FIFTY  YEARS  371 

money.  The  striking  thing  about  the  sale  of  articles  of 
luxury  is  not  the  high  prices  at  which  a  few  are  sold,  but 
the  vast  numbers  that  are  sold  at  moderate  prices.  The 
striking  thing  about  our  vast  accumulation  of  capital  is  not 
the  large  sums  invested  by  a  few,  but  the  vast  numbers 
that  are  investing  small  sums. 

Even  such  concentration  of  wealth  as  we  still  have  is 
coming  more  and  more  to  be,  Indirectly  at  least,  or  tempo- 
rarily, a  by-product  of  the  wide  diffusion  of  purchasing 
power.  It  is  less  and  less  a  result  of  monopolizing  the 
necessaries  of  life,  and  more  and  more  a  result  of  hitting 
the  popular  taste  in  what  would  formerly  have  been  called 
luxuries,  but  to  which  our  people  have  become  so  accus- 
tomed as  to  make  them  seem  almost  necessaries.  Our 
most  conspicuous  fortunes  are  being  made  by  supplying 
the  masses  with  luxuries  which  they  want  and  are  able  to 
pay  for,  and  by  selling  them  at  moderate  prices  with  small 
profits  per  unit.  Even  where  prices  are  high,  they  are  be- 
coming more  and  more  a  reflection  of  the  high  wages  of 
labor,  and  less  and  less  a  reflection  of  the  high  profits  per 
unit  of  product. 

These  new  and  growing  fortunes  would  repay  pro- 
longed study.  They  are  made  by  taking  at  the  flood  those 
"tides  in  the  affairs  of  men"  which,  in  technical  jargon, 
are  described  as  new  and  growing  demands.  These  de- 
mands, in  turn,  may  mean  either  new  desires  or  new  pur- 
chasing power.  An  increasing  national  dividend  means, 
of  course,  new  purchasing  power  for  someone.  If  it 
meant  the  increasing  riches  of  the  rich  and  the  increasing 
poverty  of  the  many,  as  some  have  affirmed,  then  the  new 


372  THIS  ECONOMIC  WORLD 

purchasing  power  would  be  in  the  hands  of  the  rich,  and 
the  new  fortunes  would  be  made  by  catering  to  them.  If, 
on  the  other  hand,  a  larger  national  dividend  means 
higher  wages  and  salaries,  or  larger  incomes  for  masses 
of  people,  then  the  new  and  increasing  demand  will  be 
where  this  new  spending  money  is  found.  Fortune  will 
await  him  who  can  tap  these  new  reservoirs  of  spending 
money  by  producing  and  selling  what  the  masses  will  buy. 
All  our  new  and  conspicuous  fortunes  are  built  up  in  this 
way,  and  not  by  catering  to  the  rich. 

In  the  automobile  industry,  to  take  a  single  example 
which  may  serve  as  a  sample  of  the  whole,  we  do  not 
manufacture  the  most  expensive  cars.  Those  who  desire 
the  height  of  luxury  must  import  their  cars  from  other 
countries.  In  those  countries,  as  in  this,  manufacturers 
attempt  to  supply  the  demand,  or  to  sell  to  those  who 
have  the  power  and  the  willingness  to  buy.  There  is  this 
difference,  however;  in  this  country  the  power  to  buy  is 
in  the  pockets  of  the  masses;  in  those  countries  it  is  in 
the  pockets  of  the  few  who  are  very  rich.  Our  most  suc- 
cessful manufacturers  supply  cars  at  moderate  prices  for 
millions  of  users.  In  1926,  there  were  22,101,393  niotor 
vehicles  registered  in  the  United  States,  or,  roughly,  one 
motor  car  for  every  6  persons.  Thus  the  entire  popula- 
tion, by  crowding  a  little,  could  be  loaded  on  motor  cars 
at  the  same  time  and  motor  out  of  the  country,  if  there 
were  any  place  to  go.  The  number  of  passenger  cars 
manufactured  during  the  year  1926  was  3,765,059.  Of 
these,  1,942,770,  or  51.6%,  were  priced  at  $675  or  less; 
320,030,  or  8.5%,  at  $676  to  $875;  929,969,  or  24.7%, 


THE  LAST  FIFTY  YEARS  373 

at  $876  to  $1,375;  402,861,  or  10.7%,  at  $1,376  to 
$2,275;  169,427,  or  only  4-5%,  at  $2,276  and  over. 

In  other  lines  of  activity  as  well,  it  is  found  that  the 
largest  reservoirs  of  purchasing  power  are  found  in  the 
pockets  of  the  masses,  who,  in  the  aggregate,  have  more 
money  to  spend,  even  for  luxuries,  than  the  very  rich. 
They  who  can  tap  these  vast  reservoirs  of  purchasing 
power,  whether  in  the  field  of  manufacturing,  publishing, 
writing,  acting,  or  lecturing,  are  the  ones  who  make  the 
most  money.  Catering  to  the  rich  in  any  field  is  rela- 
tively unremunerative.  The  vast  scale  on  which  cheap 
cameras  and  camera  supplies,  radio  sets  and  materials,  as 
well  as  books  on  radio  topics,  and  phonographs  and  rec- 
ords are  sold,  the  stupendous  growth  of  the  moving  pic- 
ture business,  and  the  huge  incomes  of  favorite  movie 
actors  and  actresses,  professional  baseball  and  football 
players,  popular  novelists,  dramatists,  and  magazine  and 
newspaper  writers,  and  even  of  chewing  gum  manufac- 
turers, all  of  whom  please  the  many  rather  than  the  few, 
testify  to  the  fact  that  the  road  to  fortune  in  this  country 
is  to  supply  luxuries  to  the  masses. 

From  the  point  of  view  of  an  older  generation,  and 
possibly  also  from  that  of  the  present  generation  in  other 
countries,  our  people  must  seem  to  be  indulging  in  an  orgy 
of  extravagance.  It  would  look  so  to  anyone  who  saw 
only  the  scale  on  which  cheap  luxuries  sell  and  the  huge 
fortunes  that  come  to  the  manufacturers  and  sellers  of 
them.  There  are  other  facts,  however,  which,  when  con- 
sidered alone,  would  seem  to  imply  that  our  people  are 
thrifty  even  to  the  point  of  penuriousness.    I  refer  to  the 


374  THIS  ECONOMIC  WORLD 

rate  at  which  they  are  accumulating  and  investing  capital, 
not  in  a  few  large  sums,  but  in  a  great  multitude  of  small 
sums.  In  fact,  the  scale  on  which  our  people  are  saving 
and  investing  their  capital — millions  of  them  in  small 
sums — is  even  more  surprising  than  the  scale  on  which 
they  are  buying  luxuries. 

These  two  facts  seem  so  contradictory  that  the  unin- 
formed may  be  excused  for  an  attitude  of  skepticism. 
The  probable  explanation  is  as  follows.  First,  all  classes 
and  conditions  of  people  find  themselves  in  possession  of 
more  spending  money  than  they  formerly  had.  Second, 
they  are  using  their  surplus  spending  money  in  different 
ways.  The  thriftless  are  spending  it  on  luxuries,  the 
thrifty  on  investments.  Thus  there  is  an  enlarged  sale  of 
luxuries  to  the  thriftless  and  an  enlarged  sale  of  securities 
to  the  thrifty.  There  is  nothing  contradictory  in  the  sit- 
uation. What  it  signifies  for  the  future  is  another  ques- 
tion. 

If  we  take  the  statistics  relating  to  the  old-fashioned 
forms  of  thrift,  such  as  the  shares  of  building  and  loan 
associations,  saving  deposits,  and  insurance  policies,  and 
add  to  them  such  facts  as  we  can  gather  regarding  some 
newer  forms  of  investment  by  laboring  people,  such  as 
their  investments  in  corporation  securities  and  the  strik- 
ing new  phenomenon  of  the  labor  bank,  we  shall  gain 
some  impression  of  the  extent  to  which  the  masses  are  sav- 
ing and  investing. 

We  may  properly  begin  with  building  and  loan  associa- 
tions because  they  seem  to  have  originated  In  Philadel- 
phia.    In  1876  there  were  450  such  associations  in  that 


THE  LAST  FIFTY  YEARS  375 

city  alone.  The  number  has  since  increased  to  something 
like  2,000.  The  statistics  of  their  growth  throughout  the 
entire  country  are  not  available  before  1893,  at  which  date 
the  first  nation-wide  survey  of  building  and  loan  associa- 
tions was  made.  Their  growth  since  then  is  illustrated  by 
the  chart  on  the  following  page.^ 

As  for  deposits  in  savings  banks,  their  increase  is  shown 
in  the  following  table : 

Year  Amount 

1876  $  941,350,255 

1880  819,106,973 

1890  1,550,023,956 

1900  2,389,719,954 

1910  4,070,486,247 

1920  6,536,596,000 

1924  8,539,855,000 

1Q25  9,065,181,000 

Besides  deposits  in  savings  banks  there  are  savings  de- 
posits in  other  banks.  Adding  these  figures  to  those  in 
savings  banks  we  get  the  total  savings  deposits  for  the 
years  1914,  1924,  and  1926.    They  are  as  follo.ws: 

Per  Capita        Total  Number 
Year  Total  Savings  Deposits  Deposit  of  Depositors 

1914  $  8,728,536,000  $  89  11,385,734 

1924  20,873,562,000  186  38,867,994 

1926  24,696,192,000  211  46,762,240 

This  great  increase  in  the  number  of  depositors  indi- 
cates a  wide  diffusion  of  savings.  Of  course,  not  all  these 
depositors  are  wage  workers.    I  do  not  know  of  any  com- 

^  See  H.  F.  Clark  and  F.  A.  Chase,  Elements  of  the  Modern  Building  and 
Loan  Associations  (New  York,  The  Macmillan  Company,  1925),  p.  463. 


376 


THIS  ECONOMIC  WORLD 


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1901           1905         1909         1913         1917           IJJI         1925 

Figure   7:  Growth   in  membership   and   assets  of  building  and   loan   asso- 
ciations in  the  United  States,  1893-1925. 

prehensive  investigation  which  shows  the  occupations  of 
all  savings  depositors.  The  Women's  Educational  and 
Industrial  Union  of  Boston  has  made  some  investigations 
regarding  women  depositors  in  a  group  of  savings  banks 
in  Greater  Boston.  Of  the  first  2,000  depositors  among 
women  gainfully  employed,  the  largest  group,  or  over 
31%,  were  engaged  in  domestic  and  personal  service  clas- 
sified as  cooks,  domestics,  housekeepers,  waitresses,  and 
others.  The  next  largest  group,  or  30%,  were  engaged  in 
clerical  occupations.  The  next  (15%)  were  those  en- 
gaged in  professional  service,  and  the  next  (14%)  were 
those  engaged  in  manufacturing  and  mechanical  indus- 
tries. 


THE  LAST  FIFTY  YEARS  377 

The  annual  statement  published  January  i,  1926,  by  the 
Philadelphia  Saving  Fund  Society  shows  the  occupations 
of  the  depositors  who  opened  accounts  with  the  society 
during  1925.  Of  the  22,000  male  depositors,  10,000  (in 
round  numbers)  were  classified  as  wage  earners,  2,000  as 
salaried  employees,  8,000  as  minors,  that  Is,  young  persons 
under  21  for  whom  no  occupation  was  given,  and  the  rest 
scattering.  Of  the  25,000  female  depositors,  1,000  were 
wage  earners,  8,000  were  wives  of  wage  earners,  1,500 
were  wives  of  salaried  employees,  and  8,000  were  minors. 
In  other  words,  this  shows  that  a  large  percentage  of  the 
total  depositors  were  wage  earners  or  wives  of  wage  earn- 
ers. If  we  leave  out  those  classified  as  minors,  five- 
sevenths  of  the  male  depositors  were  wage  earners  and 
more  than  half  of  the  females  were  either  wage  earners 
or  the  wives  of  wage  earners. 

Great  as  are  the  Increases  in  the  number  of  depositors 
and  total  deposits,  there  is  nothing  phenomenal  about 
them.  The  shrinkage  of  the  purchasing  power  of  the 
dollar  and  the  normal  Increase  In  wealth  and  population 
account  for  a  part  of  this  Increase  in  deposits.  The  thrift 
campaign  also  accounts  for  a  part.  However,  making  all 
proper  allowances,  there  has  been  a  substantial  Increase. 

It  must  be  remembered  that  savings  deposits  are  not 
supposed  to  represent  the  total  savings  of  any  except  the 
smallest  savers.  When  any  one  savings  account  grows 
large.  It  Is  likely  to  be  withdrawn  and  Invested  in  some- 
thing else,  either  a  home  or  some  Investment  that  yields  a 
little  more  than  savings  banks  pay.  Savings  deposits, 
therefore,  would  hardly  be  expected  to  keep  up  with  the 


378  THIS  ECONOMIC  WORLD 

general  prosperity  of  the  whole  people.  I  mention  them 
and  their  actual  increase  to  prepare  for  a  question  which 
may  arise  later.  When  I  speak  of  the  increase  in  invest- 
ments in  the  shares  of  corporations  the  question  may  arise, 
"Have  not  these  investments  been  made  at  the  expense  of 
savings  accounts?"  The  foregoing  shows  that  savings 
accounts  have  not  been  depleted  but  have  actually  grown 
in  a  very  substantial  manner. 

A  still  more  striking  increase  shows  Itself  In  the  matter 
of  life  insurance.  During  the  45  years  from  1880  to  1924, 
Inclusive,  the  total  number  of  ordinary  policies  increased 
from  686,000  to  22,082,377.  The  amount  of  these  ordi- 
nary policies  had  increased  from  $1,581,842,000  to  $49,- 
241,424,055,  but  the  number  of  industrial  policies  had  in- 
creased from  237,000  to  68,247,642,  while  the  amount  of 
these  industrial  policies  had  Increased  from  $20,533,000 
to  $11,343,740,085.  Adding  the  ordinary  policies  and  the 
industrial  policies,  we  find  that  the  total  number  of  poli- 
cies Increased  during  this  45-year  period  from  923,000  to 
90,330,019,  and  the  amount  of  these  policies  increased 
from  $1,602,375,000  to  $50,585,164,140. 

It  is,  of  course,  impossible  to  say  how  many  of  the  ordi- 
nary life  insurance  policies  are  held  by  wage  workers. 
The  number  of  industrial  policies  held  by  them  is  known 
to  be  considerable;  In  fact,  they  make  up  the  bulk  of  this 
class  of  policies. 

Neither  the  number  of  policies  nor  the  face  value  of 
these  policies  represents  the  savings  of  the  people  during 
any  given  period  of  time.  The  premiums  actually  paid 
in  during  a  given  year  represent  this  kind  of  savings  for 


THE  LAST  FIFTY  YEARS  379 

that  year.  On  this  basis  we  find  that  during  the  last  five 
years  there  have  been  paid  into  insurance  companies  some- 
thing like  $8,000,000,000.  Adding  this  sum  to  the  total 
savings  deposits  in  1924  and  the  total  assets  of  building 
and  loan  associations,  we  get  the  enormous  sum  of 
$33,000,000,000.  As  stated  above,  there  are  no  accurate 
figures  to  show  what  proportion  of  this  enormous  sum  has 
been  saved  by  wage  workers.  We  know  that  considerable 
quantities  are  saved,  and  since  the  numbers  of  savers  of 
various  kinds  has  increased  so  amazingly  it  means  a  wider 
and  wider  diffusion  of  this  kind  of  prosperity.  I  do  not 
know  where  we  could  find  so  many  millions  of  depositors 
and  holders  of  life  insurance  policies  without  Including  a 
great  many  wage  workers. 

A  further  evidence  of  the  wide  diffusion  of  prosperity 
is  the  vast  Increase  In  the  number  of  shareholders  In  our 
great  Industrial  corporations.  In  1890  there  were  81,000 
stockholders  of  33  leading  railroads;  by  1923  the  number 
of  stockholders  of  these  same  railroads  had  risen  to 
602,000.  The  Western  Union  Telegraph  Company  had 
1,382  stockholders  In  1875.  In  1923  the  number  had  In- 
creased to  26,276.  In  1900  the  American  Telephone  and 
Telegraph  Company  had  7,535  shareholders;  in  1924  It 
had  343,000.  If  we  take  all  the  corporations  of  the  coun- 
try we  find  that  in  1900  there  were  4,400,000  stockholders; 
in  1922  there  were  14,400,000.  An  interesting  study  has 
been  made  by  Robert  S.  Blnkerd^  of  the  sources  of  the  In- 
crease in  stockholders  from  1918  to  1925.     The  following 

^  See  Proceedings  of  the  Academy  of  Political  Science,  Vol.  11,  No.  3 
(April,  192s),  p.  34. 


38o 


THIS  ECONOIMIC  WORLD 


table  shows  the  increase  in  the  number  of  employee  and 
customer  owners  as  a  phenomenon  of  the  last  few  years. 

Source  of  Increase  in  Stockholders,  1925  over  1918 


Industries 


From 
Employees 


From 
Customers 


From 
General 
Public 


Railroads 

Express  and  Pullman 

Total  rail  and  allied  services 

Street  railways 

Gas,  electric  light  and  power  com- 
panies  

Telephone  and  telegraph 

Packers 

Ten  oil  companies 

Five  iron  and  steel  companies 

Ten  high-grade  miscellaneous  manu- 
facturing and  distributing  com- 
panies  


70,262 


45,003 
2,996 


203,216 
7,827 


70,262 
15.000 

75,000 

62,649 

7,000 

21,153 
87,696 


47,999 


815,955 


800 


211,043 
260,000 

470,324 

201,922 

28,000 

115,724 
4,530 


19,337 


Total. 


338,760 


864,75+ 


1,310,^ 


Another  striking  evidence  of  the  wide  diffusion  of  pros- 
perity is  the  growth  of  labor  banks.  A  leaflet  published 
by  the  research  department  of  the  Amalgamated  Clothing 
Workers  of  America  gives  the  financial  condition  of  these 
banks  as  of  December  31,  1925.  The  36  banks  show  a 
capital  stock  of  more  than  $9,000,000,  surplus  of  nearly 
$3,500,000,  total  deposits  of  more  than  $98,000,000,  and 
total  resources  of  just  under  $115,000,000. 

The  first  labor  bank  to  be  organized  was  the  Mount 
Vernon  Savings  Bank  of  Washington,  D.C.,  opened  May 
15,  1920,  by  the  Machinists.  The  second  oldest  is  the 
Brotherhood  of  Locomotive  Engineers  Cooperative  Na- 


THE  LAST  FIFTY  YEARS  381 

tlonal  Bank  of  Cleveland,  Ohio,  organized  November  i, 
1920.  It  is  the  largest  of  all,  having  a  capital  stock  of 
$1,000,000.  It  has  accumulated  a  surplus  of  more  than 
$295,000.  It  has  deposits  of  more  than  $26,000,000  and 
resources  of  more  than  $28,500,000.  The  third  oldest  is 
the  United  Bank  and  Trust  Company  of  Tucson,  Arizona. 
The  others  are  scattered  throughout  the  Union  from  coast 
to  coast.  They  are  owned  and  operated  by  various  labor 
groups,  the  Brotherhood  of  Locomotive  Engineers  having 
the  largest  number. 

These  two  great  tendencies,  first,  that  toward  the  seem- 
ingly extravagant  buying  by  increasing  numbers  of  people 
of  what  would  formerly  have  been  called  luxuries,  and 
second,  that  toward  the  rapidly  increasing  saving  and  in- 
vestment of  capital,  not  in  a  few  large  sums  but  in  a  multi- 
tude of  small  sums,  together  constitute  a  veritable  eco- 
nomic wonder.    How  did  it  happen? 

The  answer  to  this  question  is  found  principally  in  the 
utilization  we  have  made  of  our  man  power,  or  the  de- 
velopment of  the  productive  possibilities  of  all  classes  of 
people.  Not  only  have  we  trained  the  average  worker 
and  tended  to  promote  him  as  far  as  possible  from  the 
overcrowded  to  the  undercrowded  occupations;  we  have 
also  trained  the  talented  and  turned  a  great  deal  of  high 
talent  toward  industrial  careers.  More  than  that,  we 
have  no  leisure  class  worth  mentioning.  It  is  not  an 
American  ideal  that  a  man  should  retire  and  indulge  in 
elegant  leisure  as  soon  as  he  has  accumulated  a  compe- 
tence. Wherever  this  ideal  prevails,  the  more  capable  the 
man,  the  earlier  he  will  retire  and  the  greater  the  portion 


382  THIS  ECONOMIC  WORLD 

of  his  life  that  will  be  wasted.  Only  third-rate  men  will 
stay  in  business  all  their  lives,  and  they  only  for  the  reason 
that  they  can  never  accumulate  enough  to  enable  them  to 
retire.  Where  business  is  managed  only  by  third-rate 
men,  there  are  only  third-rate  industries,  the  product  per 
man  is  low,  and  only  low  wages  can  be  paid.  First-rate 
men  stay  In  business  in  this  country,  even  though  they 
might  retire.  That  is  one  reason  why  we  have  first-rate 
industries  that  manage  to  pay  first-rate  wages. 

Next  to  killing,  stealing,  and  lying,  drunkenness  is  the 
greatest  factor  in  the  waste  of  man  power  in  modern  civili- 
zation, especially  in  northern  latitudes.  The  evidence  is 
overwhelming  that,  for  the  country  as  a  whole,  drunken- 
ness and  other  by-products  of  alcoholism  have  greatly  de- 
creased since  prohibition.  There  are,  it  Is  true,  some 
thickly  populated  areas  in  which  prohibition  has  not  been 
very  well  enforced.  Nevertheless,  it  is  probably  more 
than  a  coincidence  that  the  most  striking  evidences  of  the 
diffusion  of  prosperity,  especially  among  the  working 
classes,  synchronizes  with  the  period  of  national  prohibi- 
tion, though  the  restriction  of  immigration  came  about 
the  same  time.  These  two  laws  are  probably  the  best 
laws  ever  enacted  in  this  country  in  the  interest  of  the 
laboring  classes.  However,  not  only  Is  prohibition  poorly 
enforced,  but  the  restriction  of  immigration  is  only 
partial.  There  is  no  restriction  of  immigration  from  any 
American  country.  The  result  is  that  Mexico  has  be- 
come our  greatest  source  of  cheap  labor.  Mexican  peons 
are  coming  to  us  by  hundreds  of  thousands  and  very 
definitely  threaten  to  lower  our  wage  levels.     If  prohibi- 


THE  LAST  FIFTY  YEARS  383 

tion  could  be  reasonably  well  enforced — that  Is,  as  well 
enforced  as  other  laws,  such  as  those  against  highway  rob- 
bery (which  Is  not  saying  much) — and  If  the  American 
continent  could  be  put  on  the  quota  basis  under  our  immi- 
gration law,  there  is  not  much  reason  to  doubt  that  wages 
would  advance  still  more  rapidly  and  savings  and  invest- 
ments expand  at  a  hitherto  unheard-of  rate. 

A  secondary  result  of  our  policy  of  developing  our  man 
power  Is  the  use  we  have  made  of  power-driven  ma- 
chinery. Even  In  agriculture,  more  work  is  done  by 
machinery  and  less  by  human  muscles  than  In  other  parts 
of  the  world.  Until  recently,  however,  most  of  the  power 
used  on  the  farms  was  animal  power.  Before  1900  the 
horse  power  used  on  farms  exceeded  the  horse  power  of 
all  the  steam  engines  used  in  manufacturing.  Since  that 
time  steam  engines  have  furnished  more  power  than 
horses  in  this  country.  The  quantity  of  power  used  Is 
probably  the  best  index  we  have  of  the  quantity  of  power- 
driven  machinery.  The  diagrams^  on  pages  384  and  38$ 
show  the  increase  in  the  output  per  man  and  the  power  per 
man  In  two  fundamental  industries,  Iron  and  copper.  It 
will  be  noticed  that  the  curves  bend  sharply  upward  in 
1880,  the  first  census  year  after  the  Centennial. 

Some  comparison  between  the  United  States  and  other 
countries  is  quite  as  important  as  the  growth  of  power 
from  decade  to  decade  in  this  country.  Professor  Taus- 
sig and  others,  especially  Mr.  A.  W.  Flux,  have  collected 

^  These  charts  are  reproduced  from  Louis  I.  Dublin,  Population  Prob- 
lems (PoUak  Foundation  for  Economic  Research;  Boston,  Houghton 
Mifflin  Company,  1926),  pp.  115-116. 


384 


THIS  ECONOMIC  WORLD 


Gross  Tons                                                 HoRSt 
Per  Year                                                 Power 

1,400 

1,200 

1.000 

600 

600 

400 

200 
o 

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10 

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6 

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.►-""'POWEP   PER    MAN 

1                1          1 

o       o       o       o         o     o       o> 

iO         I*-         eO         0)            O       o         — 
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Figure  8:  Yearly  output  per  man  and  power  per  man  in  the  iron  mines  of 
the   United   States,    1860-1919. 

some  significant  evidence  as  to  the  product  per  worker  in 
different  countries  in  selected  industries  which  permit  of 
such  a  comparison.  It  appears  that  the  product  per 
worker  Is  higher  In  the  United  States  than  In  other  coun- 
tries, and  this  higher  product  per  worker  seems  to  be  cor- 
related with  the  larger  use  of  power  and  power-driven 
machinery  per  worker.  In  the  steel  industry,  for  example, 
the  total  number  of  workers  is  very  little  greater  in  the 
United  States  than  in  Great  Britain,  the  ratio  being  7  to 


THE  LAST  FIFTY  YEARS 


38s 


Thousands 
Of  Pounds 

do 


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Figure  9:  Yearly  output  per  man  and  power  per  man  in  the  copper  mines 
of  tile  United  States,  1860-1919. 

6.  But  the  total  product  in  tonnage  Is  a  little  more  than 
twice  as  large,  showing  that  the  product  per  worker  is 
practically  twice  as  great  in  the  United  States  as  in  Great 
Britain.  It  is  also  worthy  of  remark  that  the  American 
industry  uses  almost  exactly  twice  as  much  horse  power 
per  man  as  the  British.  The  table  on  page  386  shows  the 
comparative  product  per  man  in  the  leading  coal  produc- 
ing countries. 

Gasoline  is  second  only  to  coal  as  a  source  of  power  at 


386 


THIS  ECONOMIC  WORLD 
Tons  of  Coal  Produced^ 


191 1 

1914 

1918 

Per 
under- 
ground 
worker 

Per 
worker 
of  every 

kind 

Per 
under- 
ground 
worker 

Per 
worker 
of  every 

kind 

Per 
under- 
ground 
worker 

Per 
worker 
of  every 

kind 

819 
371 
381 
244 
300 

681 
300 

28s 
176 
216 
5SS 
560 
127 

803 
341 
389 
200 

673 

275 
284 
143 

S36 
589 
128 

1,134 
337 

207 

890 

26s 

138 

460 

New  South  Wales 

India 

60s 
126 

the  present  time.  The  whole  automobile  Industry,  of 
course,  Is  based  partly  upon  this  new  source  of  power. 
Gasoline,  however,  does  not  create  an  automobile  Industry 
in  those  countries  whose  people  are  not  mechanically 
gifted.  Even  In  this  case,  therefore,  we  come  back  to  the 
proposition  that  the  development  of  our  man  power  Is  the 
fundamental  thing  In  the  growth  of  our  Industries. 

This  Is  said,  not  for  the  purpose  of  patting  ourselves 
on  the  back,  but  as  a  suggestion  for  our  future  guidance. 
If  we  rely  upon  our  physical  resources  alone,  they  will  not 
do  much  for  us;  but  if  we  develop  the  Industrial  Intelli- 
gence of  our  people,  they  will  find  ways  of  developing 
whatever  resources  we  have.  They  will  be  able  to  econo- 
mize their  own  labor  by  tapping  other  sources  of  power 
than  human  muscles,  by  harnessing  our  streams  and  the 
vast  quantities  of  cheap  power  In  our  coal  beds  and  oil 
fields.  These  latter  will  some  time  be  exhausted,  but  the 
resources  of  the  human  mind  are  inexhaustible.     If  these 


^  "Labor  Costs  in  the  United  States  as  Compared  with  Other  Countries," 
Quarterly  Journal  of  Economics,  November,  1924. 


THE  LAST  FIFTY  YEARS  387 

mental  resources  are  developed,  they  will  find  other 
sources  of  mechanical  power  still  to  be  harnessed — the 
winds  and  the  tides  and  that  incalculable  stream  of  en- 
ergy that  comes  daily  from  our  greatest  available  power 
plant,  the  sun.  We  shall  have  solar  engines  whenever  it 
pays  to  build  them,  that  is,  when  we  no  longer  have  any- 
thing cheaper,  such  as  coal  and  gasoline. 

Meanwhile,  we  must  be  duly  mindful  of  the  fact  that 
we  are  a  fortunate  people.  Our  geographical  resources 
are  very  great.  We  probably  have  more  good  agricul- 
tural soil  than  any  country  except  Russia.  Our  coal  beds 
are  probably  more  extensive  than  those  of  any  country 
except  China.  So  far  as  is  now  known,  no  country  has 
such  rich  beds  of  iron  ore.  Little  is  yet  known  as  to  the 
petroleum  resources  of  the  world.  At  least  we  can  say 
that  we  have  discovered  richer  resources  of  this  kind  than 
any  other  country,  though  it  may  be  merely  because  we 
have  searched  a  little  more  diligently. 

Besides,  we  are  a  big  country.  Our  very  bigness  has 
acted  as  a  stimulus  to  the  constructive  imagination  of  our 
people.  It  has  helped  to  rid  our  minds  of  the  pestilential 
idea,  inherited  from  the  Old  World  and  still  sedulously 
taught  by  those  who  are  wholly  dependent  upon  that 
source  for  all  they  know  of  culture,  that  business  is  in 
some  way  sordid.  The  vast  possibilities  of  our  wide  terri- 
tories have  given  to  business  a  glamor  akin  to  that  of  em- 
pire building  in  older  countries  and  less  happy  times. 

We  have  made  extensive  use  of  power  from  other 
sources  than  human  muscles  even  in  agriculture.  From 
the  following  table  it  will  be  seen  that  the  production  of 


388 


THIS  ECONOMIC  WORLD 


our  three  leading  crops,  corn,  wheat,  and  cotton,  a  Httle 
more  than  trebled  between  1870  and  1920,  yet  our  total 
population  did  not  quite  treble  during  that  time,  and  our 
rural  population  did  not  double.  During  the  twenty  years 
from  1900  to  1920,  it  increased  very  slightly,  that  is,  from 
45  million  to  51  million.  The  only  rational  explanation 
is  that  the  effectiveness  of  labor  on  farms  was  increased 
by  the  increasing  use  of  power,  mainly  that  of  horses  and 
mules,  but  latterly  also  of  tractors.^ 


Leading  Agricultural 
Products 

Leading  Sources 
OF  Power 

Year 

Corn 

(bushels) 

Wheat 

(bushels) 

Cotton 

(soo-lb. 
bales) 

Coal 

(tons) 

Petroleum 
(gallons) 

1870 

1880 

1,094,255,000 
1,717,434,543 
1,489,970,000 
2,105,102,516 
2,886,260,000 
3,208,584,000 

235,884,700 
498,549,868 
399,262,000 
522,229,505 
635,121,000 
833,027,000 

4,024,527 
6,356,988 
8,562,089 
10,123,027 
11,608,616 
13,439,603 

29,496,054 
63,822,830 
140,866,931 
240,789,310 
447,853,909 
587,331,190 

220,951,000 
1,104,017,166 

1890 

1900 

1910 

1920 

1,924,550,024 
2,672,062,218 
8,801,404,416 
18,622,884,000 

While  our  population  was  trebling  (almost),  our  pro- 
duction of  coal  multiplied  almost  twenty  times  and  that  of 
petroleum  more  than  eighty  times.  These  are  our  two 
principal  sources  of  power — coal  for  factories  and  rail- 
roads, and  petroleum,  or  its  derivative,  gasoline,  for 
motor  vehicles. 


^  According  to  figures  collected  by  the  National  Industrial  Conference 
Board,  24.4  acres  were  being  cultivated  per  farm  worker  in  the  United 
States  immediately  before  the  World  War;  in  Scotland,  16.6;  in  England, 
9.5;  in  France,  8.3;  in  Germany,  6.2;  and  in  Italy,  4.2  acres.  During  the 
decade  from  1910  to  1920,  American  farm  labor  increased  in  efficiency 
about  22.5%.  The  number  of  farm  workers  decreased  about  9%,  but  the 
volume  of  crop  production  increased  about  11%.  The  value  of  farm 
machinery  in  the  United  States  increased  from  about  $36  per  worker  in 
1870  to  $176  per  worker  in  1920.  In  other  words,  the  average  farm 
worker  is  now  using  about  five  times  as  much  machinery  as  he  did  in  1870. 


THE  LAST  FIFTY  YEARS 


389 


The  following  table  shows  the  kinds  of  power  used  in 
manufacturing: 

Quantities  and  Kinds  of  Power  Used  in 
American  Manufactures* 

(in  horse  power) 


Kinds 

1909 

1914 

1919 

1923 

Steam  engines 

Internal  combustion 
engines 

14,228,632 

751,186 
1,822,888 
1,749,031 

15,591,171 

988,591 
1,826,413 
3,884,724 

17,036,201 

1,241,829 
1,765,131 
9,284,499 

16,695,493 

1,230,302 

1,802,805 

13,365,628 

Water  power 

Rented  electric  power 

*  From  Statistical  Abstract  oj  the  United  States  for  192 1  and  1924. 

The  most  significant  thing  in  the  above  table  is  the 
rapid  increase  in  the  amount  of  rented  electrical  power. 
This  is  a  part  of  a  great  movement  for  the  manufacture 
of  power  in  great  central  plants,  driven  by  either  steam  or 
water  power,  or  by  a  combination  of  both,  and  the  distri- 
bution of  that  power  to  factories  in  the  form  of  electric 
current.  Already  in  1923  the  amount  of  rented  electric 
power  in  factories  is  almost  equal  to  and  will  probably 
soon  exceed  that  of  steam  engines  installed  within  the 
factories.  No  one  except  an  electrical  engineer  is  compe- 
tent to  discuss  the  future  possibilities  of  super-power,  but 
anyone  can  see  from  the  above  figures  that  considerable 
progress  has  already  been  made.  There  is  no  reason  for 
supposing  that  it  will  suddenly  stop.  Some  think,  that  it 
will  lead  to  a  speedy  development  of  our  water  power  re- 
sources; others,  that  this  will  be  postponed  until  coal 
becomes  scarcer  and  dearer  than  it  shows  any  sign  of  be- 
coming in  the  immediate  future.     It  is  not  difficult  to 


390  THIS  ECONOMIC  WORLD 

imagine  a  time  in  the  distant  future  when  our  coal  beds 
and  petroleum  fields  will  be  exhausted,  when  the  technique 
of  power  transmission  will  be  so  perfected  that  not  only 
our  streams  of  water  but  the  streams  of  solar  energy  that 
fall  on  the  almost  cloudless  deserts  of  the  Southwest  will 
be  harnessed  and  the  power  distributed  over  the  length 
and  breadth  of  the  land.  At  any  rate,  It  is  a  safe  hazard 
that  the  best  insurance  against  a  future  shortage  of 
mechanical  power  is  the  development  of  the  latent  powers 
of  the  human  mind.  The  technique  and  equipment  for 
the  development  of  these  resources  are  the  technique  and 
equipment  of  popular  education. 

Have  we  wasted  these  fifty  years  ?  The  mastery  which 
we  have  gained  over  the  forces  of  nature  through  the  de- 
velopment of  our  human  resources  is  a  sufficient  answer. 
Having  sought  first  the  ideals  of  justice  and  a  fair  chance 
for  everyone,  power  and  goods  have  been  added  unto  us. 
We  are  able  to  have  what  we  want.  The  next  thing  is  to 
refine  and  elevate  our  wants. 


XIII 


HOW  LONG  WILL  THIS  DIFFUSION  OF 

PROSPERITY  LAST,  AND  WHAT 

WILL  IT  DO  TO  US? 

THERE  may  be  differences  of  opinion  as  to  whether 
this  country  as  a  whole  is  prosperous  or  not.  There 
cannot  be  much  doubt  that  wage  workers  are  better  off 
here  than  In  other  countries,  in  so  far,  at  least,  as  high 
wages  can  make  them  well  off.  Nor  can  there  be  much 
doubt  that  our  wage  workers,  taking  the  country  as  a 
whole,  are  better  off  than  they  were  before  the  World 
War.  The  scale  on  which  they  are  both  spending  and 
saving  money  should  convince  anyone  of  that.  As  a 
partial  offset  there  are,  of  course,  some  who  have  lost 
because  of  these  high  wages.  Farmers  who  cannot  work 
their  own  farms  but  must  depend  on  hired  labor  have  not 
been  able  to  get  prices  that  would  enable  them  to  pay  these 
high  wages  without  losing  money.  A  few  lines  of  manu- 
facturing have  found  themselves  In  the  same  condition. 
Besides,  there  Is  the  general  complaint  of  the  high  wages 
of  domestic  servants.  These,  however,  are  among  the 
Inevitable  hardships  of  any  change,  however  progressive 
It  may  be  in  its  general  effects. 

They  who  formerly  asserted  that  high  wages  or  a  gen- 
eral diffusion  of  prosperity  were  impossible  under  the 

391 


392  THIS  ECONOMIC  WORLD 

present  economic  system  because  of  what  they  supposed 
was  an  Inevitable  tendency  of  wealth  to  concentrate  In 
fewer  and  fewer  hands,  must  now  content  themselves  with 
saying  that  our  present  condition  will  not  last,  that  as 
soon  as  certain  special  circumstances  are  removed,  wages 
will  again  tend  downward,  interest,  profits,  and  rent  up- 
ward, and  that  the  so-called  "law  of  concentration  of 
capital"  will  begin  to  produce  its  logical  results.  The 
"special  circumstances"  which  are  commonly  evoked  to 
explain  this  temporary  diffusion  of  wealth  are,  first,  the 
World  War;  second,  our  rich  natural  resources;  third, 
our  sparse  population.  "Just  wait,"  they  say,  "until  the 
war  profits  are  dissipated,  until  our  natural  resources  are 
used  up,  or  until  we  become  as  densely  populated  as  older 
countries,  and  then  see  what  happens  to  wages  and  the 
prosperity  of  laborers." 

Whatever  effect  profiteering  might  have  upon  total 
national  wealth,  there  is  no  reason  to  suppose  that  it  alone 
would  produce  higher  wages  or  that  it  would  even  tend 
toward  a  wide  diffusion  of  prosperity.  It  might  be  ex- 
pected, on  the  contrary,  to  concentrate  rather  than  to 
diffuse  wealth.  The  spending  of  money  made  by  war 
profiteering  would,  of  course,  tend  to  raise  prices  and 
stimulate  business  activity,  but  it  could  scarcely  raise  real 
wages  by  raising  money  wages  more  than  It  raised  the 
money  cost  of  the  things  laborers  had  to  buy.  Again,  if 
profiteering  accounts  for  our  generally  high  wages,  Hol- 
land, the  Scandinavian  countries,  Spain,  and  Latin 
America,  which  never  entered  the  war  at  all,  ought  to  be 
even  richer  than  we  and  also  ought  to  show  a  stronger 


HOW  LONG  WILL  IT  LAST?  393 

tendency  toward  the  diffusion  of  wealth  by  paying  higher 
wages  relatively  than  we. 

As  to  our  rich  resources,  we  are  undoubtedly  blest  in 
that  respect;  but  not  more  so  than  many  other  countries, 
such  as  Brazil,  Argentina,  Mexico,  and  Russia.  Yet  these 
countries  do  not  pay  high  wages.  In  fact,  rich  resources, 
unless  the  institutions  of  the  country  prevent  it,  are  quite 
as  hkely  to  result  in  concentration  as  in  the  diffusion  of 
wealth.  To  begin  with,  rich  resources  attract  capital  as 
well  as  labor.  There  was  a  time  when  foreign  capital 
was  attracted  to  this  country  as  well  as  foreign  laborers. 
Lately  we  have  not  been  importing  much  capital,  but 
foreign  laborers  kept  coming  until  we  had  to  restrict  im- 
migration to  prevent  our  labor  market  from  being  flooded 
with  them.  The  rich  resources  of  Mexico  tend  to  attract 
American  capital;  they  do  not  attract  any  American  wage 
labor.  In  fact,  their  wage  workers  tend  to  come  here  and 
will  continue  to  do  so  until  they  are  restricted;  while  our 
capital  tends  to  go  there  and  will  continue  to  do  so  until 
the  Mexican  government  restricts  it.  In  short,  that  is  a 
country  which,  either  in  spite  of  or  because  of  its  natural 
resources,  attracts  capital  and  exports  labor,  while  ours 
exports  capital  and  attracts  labor.  Institutions  seem  to 
have  more  to  do  with  the  diffusion  of  prosperity  than 
natural  resources.  Institutions  make  this  a  better  coun- 
try than  Mexico  for  labor.  Our  natural  resources  do  not 
attract  any  Mexican  capital;  Mexico's  natural  resources 
attract  our  capital. 

Another  point  to  be  remembered  is  that  the  prosperity 
of  our  wage  workers  has  been  perceptibly  accelerated 


394  THIS  ECONOMIC  WORLD 

since  the  World  War,  yet  no  new  natural  resources  have 
been  discovered  or  developed  during  this  period.  Two 
things  seem  to  synchronize  with  this  upward  bend  in  the 
curve  of  prosperity,  namely,  the  restriction  of  immigration 
and  prohibition.  This  would  seem  to  suggest  that  these 
had  more  to  do  than  our  natural  resources  with  the  rather 
sudden  increase  in  the  prosperity  of  our  wage  workers. 
At  any  rate,  this  noticeable  change  In  economic  conditions 
ought  to  be  correlated  with  some  fairly  recent  happenings 
and  not  accounted  for  on  the  ground  of  something  that 
has  existed  from  the  beginning  of  our  national  life.  As 
shown  in  other  chapters,  there  are  sound  and  logical 
reasons  why  the  restriction  of  immigration  should  have 
been  expected  to  raise  wages  and  why  prohibition  should 
result  in  greater  general  prosperity. 

As  to  our  sparseness  of  population,  we  have  a  great 
advantage  over  some  old  countries,  but  there  is  no  reason 
why  that  advantage  may  not  be  permanent.  Of  course, 
if  we  open  our  doors  to  immigration  it  is  only  a  question 
of  time  when  our  wages  will  fall  to  the  level  of  those  of 
Europe,  or  even  of  Asia  if  free  Asiatic  immigration  is 
permitted.  But  if  American  workingmen  and  their 
friends  are  alert  and  ready  to  vote  against  each  and  every 
anti-restrictionist,  no  matter  how  he  covers  up  his  anti- 
restriction  policies  with  other  less  important  issues,  there 
is  no  reason  why  that  should  ever  happen.  They  hold 
that  matter  In  their  own  hands,  and  so  far  as  Immigration 
is  concerned,  they  can  vote  themselves  low  wages  by 
voting  for  anti-restrictionists,  or  high  wages  by  voting  for 
restrictionists. 


HOW  LONG  WILL  IT  LAST?  395 

As  to  the  natural  Increase  of  population,  that  also  is 
under  control.  A  high  standard  of  living,  the  world 
over,  goes  with  a  low  birth  rate,  and  a  low  standard  with 
a  high  birth  rate.  If  we  see  to  it  that  a  high  standard  of 
living  is  maintained,  that  will  take  care  of  the  population 
problem,  and  we  never  shall  be  so  overcrowded  in  this 
country  as  European,  not  to  mention  Asiatic,  countries 
have  already  become.  Besides,  as  shown  In  the  chapter 
on  the  "Present  Status  of  the  Population  Problem,"  It  is 
not  the  total  population  so  much  as  the  occupational  dis- 
tribution of  the  population  that  counts  in  determining 
whether  wealth  shall  be  concentrated  or  diffused. 

If,  through  enlightened  views  on  education  and  a  wise 
direction  of  our  educational  policies,  we  continue  thinning 
out  the  ranks  of  manual  workers  and  increasing  the  num- 
ber of  those  who  are  capable  of  so  managing  industries 
as  to  pay  high  wages,  that  is,  by  training  large  numbers  of 
technicians,  managers,  Investors,  and  enterprisers,  two 
things  can  be  predicted — one  with  reasonable  and  the 
other  with  absolute  certainty.  The  one  prediction  Is  that, 
with  a  sufficient  number  of  highly  trained  men  massed  on 
the  problem,  we  shall  find  ways  of  utilizing  other  resources 
even  though  those  on  which  we  now  rely  should  be  ex- 
hausted. When  our  coal  beds  and  oil  wells  are  all  gone 
there  are  other  potential  sources  of  energy  to  draw  upon. 
The  distillation  of  combustibles  from  shale,  and  even  solar 
engines  are  within  the  limits  of  technical  possibility  and 
probably  can  be  made  economically  possible  whenever  the 
demand  Is  sufficiently  Intense.  Soil  chemists  and  soil  bac- 
teriologists seem  to  show  no  lack  of  confidence  in  the 


396  THIS  ECONOMIC  WORLD 

possibilities  of  soil  conservation  and  soil  improvement. 
Numerous  other  possibilities  lie  before  us,  and  it  is  a 
reasonable  prediction  that,  If  enough  intelligence  is  massed 
upon  discovering  them,  we  shall  never  lack  for  physical 
resources. 

We  can  predict  with  absolute  certainty  that  such  pros- 
perity as  the  nation  as  a  whole  achieves  will  be  diffused 
and  not  concentrated  if  we  look  carefully  after  the  occu- 
pational distribution  of  our  population.  If  we  do  this, 
and  if  the  total  prosperity  increases,  every  class  or  occupa- 
tion will  share  in  it,  while  if  our  total  prosperity  declines, 
every  class  and  occupation  will  share  also  in  that  decline. 
There  is  absolutely  no  reason  why  the  widely  diffused 
prosperity  which  we  are  now  witnessing  should  not  perma- 
nently increase.  The  only  possible  reason  why  our  total 
prosperity  may  not  increase  indefinitely  is  the  possibility 
that  at  some  time  we  may  fail  to  mass  enough  high  intelli- 
gence upon  the  economic  problems  of  that  time  to  meet 
new  difficulties  as  fast  as  they  arise. 

The  tendency  toward  diffusion  will  stop  when  but  not 
until  we  ourselves  reverse  the  process  by  doing  one  or 
more  of  several  things.  We  can  reverse  the  process  by 
discouraging  our  ablest  men  from  going  into  business  and 
expanding  our  industries.  When  our  industries  are  run 
by  second-  and  third-rate  men,  we  shall  have  second-  and 
third-rate  industries  which  cannot  expand  nor  employ 
large  numbers  of  men.  We  can  discourage  our  ablest  men 
from  entering  industry  in  several  ways.  We  can  discour- 
age them,  for  example,  by  cultivating  a  general  jealousy 
of  or  resentment  toward  those  who  are  successful  in  build- 


HOW  LONG  WILL  IT  LAST?  397 

ing  great  enterprises  or  In  making  two  jobs  to  grow  where 
one  grew  before.  We  can  also  discourage  them  by  chang- 
ing our  educational  policy  and  aiming  to  produce  In  our 
universities  men  fitted  only  for  graceful  consumption,  ele- 
gant leisure,  or  the  more  ornamental  professions.  We 
can  also  work  for  concentration  rather  than  diffusion  of 
wealth  by  discouraging  thrift  and  decreasing  the  supplies 
of  capital.  We  can  do  this  by  writing  books  on  the  fallacy 
of  saving  and  by  carrying  on  an  active  propaganda  in 
favor  of  lavish  expenditure  on  the  part  of  all  classes. 
We  can  do  it  also  by  endowing  institutes  to  further  the 
cause  of  extravagance,  thus  limiting  the  profits  of  accumu- 
lation and  ownership  to  the  few  and  keeping  the  masses 
in  what  some  are  pleased  to  call  "their  places." 

The  most  direct  and  deadly  thrust  at  labor  is  made  by 
those  who  are  working  to  increase  the  supplies  of  manual 
labor,  first,  by  attacking  our  immigration  law,  second,  by 
attacking  our  system  of  public  education,  third,  by  attack- 
ing prohibition,  fourth,  by  advocating  large  families 
among  the  poor,  thus  assuring  a  plentiful  supply  not  only 
of  cannon  fodder  but  of  cheap  labor  as  well.  Many  of 
these  attacks  are  camouflaged  under  various  other  names. 
In  reality,  they  are  all  aimed  to  make  things  easier  for  the 
employing  classes  by  supplying  them  with  increasing  quan- 
tities of  low-wage  labor.  Those  who  are  working  against 
our  immigration  laws  are  so  obviously  working  for  the 
impoverishment  of  our  own  manual  workers  as  to  make 
it  an  insult  to  the  intelligence  of  the  reader  even  to  stop 
to  discuss  it. 

Certain  self-appointed  spokesmen  of  labor  are  attack- 


398  THIS  ECONOMIC  WORLD 

ing  the  prohibition  law.  When  men  sober  up,  begin  to 
work  steadily,  and  to  save  and  Invest  a  little  money,  they 
become  more  independent,  more  inclined  to  pick  and 
choose  their  jobs.  As  Mrs.  Cannon  has  ironically  ex- 
pressed it,  "Prohibition  has  withdrawn  from  the  economic 
field  that  last  hope  of  the  overburdened  American  house- 
keeper, the  faithful  charwoman,  sole  support  of  a  drunken 
husband."  A  gentleman  in  Spokane  once  gave  a  unique 
argument  against  prohibition.  In  the  old  days,  said  he, 
when  the  lumberjack  came  into  town  after  several  months 
in  the  woods,  with  a  few  hundred  dollars  in  his  pockets.  It 
took  him  only  a  short  time  to  blow  In  his  money.  Then 
as  soon  as  he  sobered  up,  he  was  compelled  to  go  back  to 
work.  Under  prohibition,  it  took  him  months  where  it 
formerly  took  him  weeks  to  get  rid  of  his  money,  and 
until  he  did,  he  would  not  go  back  to  work. 

Every  attack  upon  our  system  of  public  education  is  a 
movement  for  the  increase  of  our  supplies  of  low-wage 
labor  by  leaving  great  masses  of  men  with  no  training  that 
will  fit  them  for  anything  except  the  low-wage  occupa- 
tions. Everyone  who  advises  worklngmen  to  beget  more 
children  than  they  can  support  and  educate  properly  is 
also,  whether  he  knows  it  or  not,  working  for  a  large 
supply  of  cheap  labor. 

There  are  other  pessimists  who  admit  that  so  far  as 
material  prosperity  is  concerned,  our  working  classes  are 
well  off,  but  they  will  not  thus  be  robbed  of  a  grievance. 
Admitting  that  prosperity  is  widely  diffused,  that  wage 
workers  as  well  as  others,  in  addition  to  saving  and  in- 
vesting on  a  large  scale,  are  also  buying  comforts  and 


HOW  LONG  WILL  IT  LAST?  399 

even  luxuries  on  a  scale  never  before  known  in  the  history 
of  the  world  and  not  now  known  in  any  other  country; 
admitting  also  that  such  great  fortunes  as  are  still  being 
made  are  made  not  by  monopolizing  the  necessaries  of 
life  but  mainly  by  catering  to  the  popular  taste  in  cheap 
luxuries,  ranging  all  the  way  from  chewing  gum  to  auto- 
mobiles, including  such  things  as  low-priced  cameras, 
popular  novels  and  magazines,  soft  drinks,  moving  pic- 
tures, popular  athletics,  and  so  on,  nevertheless  they  main- 
tain that  this  is  not  real  prosperity,  because  the  cheap 
luxuries  which  people  are  buying  do  them  no  good,  that 
they  are  merely  wasting  their  substance  in  riotous  living 
and  are,  in  reality,  no  better  off  than  wage  workers  in 
Europe  or  even  in  Asia.  This  brings  us  to  the  question 
raised  by  the  second  half  of  the  title  of  this  chapter. 
What  will  the  diffusion  of  prosperity  do  to  us?  It  calls 
for  serious  discussion,  and  should  not  be  decided  either 
way  in  a  spirit  of  flippancy. 

There  is  some  advantage  in  being  in  a  position  where 
one  can  buy  useless  or  even  harmful  things,  even  though 
it  is  agreed  that  it  is  better  not  to  do  so.  A  situation  in 
which  large  classes  cannot  buy  such  things  because  they 
have  not  money  enough  to  buy  anything  but  necessaries  is 
not  a  good  economic  condition.  An  economic  condition 
which  permits  every  class  to  buy  something  besides  the 
necessaries  of  life  admittedly  has  its  dangers;  but  it  also 
has  in  it  possibilities  for  good.  Certainly,  it  would  be  the 
poorest  kind  of  a  reason  for  keeping  the  masses  in  a  state 
of  poverty  to  say  that  they  are  likely  to  spend  their  money 
foolishly  if  they  become  prosperous.    This  merely  means 


400  THIS  ECONOMIC  WORLD 

that  all  problems  will  not  be  solved  the  moment  potential 
prosperity  in  the  form  of  purchasing  power  is  diffused 
among  all  classes.  Nevertheless,  it  does  positively  mean 
that  one  problem  is  solved,  and  we  can  then  turn  our 
attention  to  others  that  follow  in  its  train. 

The  new-rich  everywhere  are  inclined  to  have  their 
fling — to  buy  the  things  that  have  been  just  beyond  their 
reach  in  the  days  of  their  poverty.  Wage  workers  as  a 
class  are  exactly  like  every  other  class  in  this  and  all  other 
respects.  Instead  of  being  a  just  subject  of  ridicule,  the 
new-rich  are  always  entitled  to  our  sympathetic  interest 
and  encouragement.  To  begin  with,  new  wealth,  provided 
it  is  earned,  is  the  most  respectable  kind  of  wealth.  It 
represents  the  results  of  one's  own  ability  and  exertion. 
Inherited  wealth  is  the  least  defensible  form  of  legally 
acquired  wealth,  and  the  most  useless  members  of  society 
are  those  who  live  unproductively  on  Inherited  wealth. 
In  the  second  place,  there  Is  pathos  rather  than  humor  (if 
there  is  a  real  difference)  In  the  efforts  of  any  creature 
to  adjust  itself  to  a  situation  for  which  Its  previous  ex- 
perience has  not  trained  It.  This  applies  not  only  to  the 
fish  out  of  water,  but  also  to  those  people  who  were  once 
poor  but  now  rich,  as  well  as  to  those  who  were  once  rich 
but  now  poor.  A  generation  or  two  of  affluence  will  be 
a  means  of  educating  the  majority  of  laborers  In  sounder 
appreciation  of  real  values. 

The  Intelligentsia,  however,  are  generally  more  worried 
over  what  Is  happening  to  themselves  than  over  what 
manual  workers  will  do  with  their  new-found  prosperity. 
Many  of  them  are  quite  willing,  even  anxious,  that  all 


HOW  LONG  WILL  IT  LAST?  401 

large  employers  of  labor  should  pay  higher  and  higher 
wages  to  their  laborers,  but  are  incensed  when  those 
wages  are  shifted  onto  themselv^es  in  the  form  of  higher 
prices,  and  they  are  dumfounded  when  household  servants 
also  demand  wages  comparable  with  those  which  may  be 
earned  in  large  industrial  establishments.  The  readjust- 
ments that  will  have  to  be  made  in  private  life  are  even 
more  profound  than  those  that  are  taking  place  in  indus- 
try. It  is  the  machine,  or  rather,  the  inventors,  investors, 
and  enterprisers  back  of  it,  that  is  making  possible  the 
large  production  per  man  and  the  high  wages  in  industry. 
It  is  likewise  the  machine  that  must  relieve  housekeepers, 
small  shopkeepers,  and  farmers  of  the  soul-killing 
drudgery  which  they  formerly  shifted  onto  cheap  labor 
or,  in  a  few  cases,  onto  slaves. 

It  is  as  useless  to  attempt  to  stay  the  course  of  this 
revolution  which  is  shifting  drudgery  onto  the  machine  as 
to  attempt  to  stay  the  stars  in  their  courses.  However  dis- 
paragingly we  may  speak  of  our  "machine-made  civiliza- 
tion," no  one  can  truthfully  deny  that  it  excels  every  other 
civilization  in  one  important  respect.  It  makes  possible 
the  emancipation  of  all,  and  not  simply  of  the  few,  from 
the  body-wrecking,  brutalizing  effect  of  overwork.  The 
"man  with  the  hoe"  who  became  merely  a  food  motor  is 
to  be  displaced  by  the  man  directing  a  machine  which  is 
driven  by  a  mechanical  motor.  If  they  only  knew  it,  the 
machine  is  to  do  for  the  cultured  householders  of  the 
future  what  cheap  servants  did  for  those  of  the  past. 

Every  civilization  of  which  we  know  anything  has  had 
some  means  by  which  the  fortunate  elements  in  society 


402  THIS  ECONOMIC  WORLD 

could  relieve  themselves  of  soul-killing  drudgery  and  de- 
vote themselves  to  the  arts  and  graces  of  life.  Slaves 
supplied  the  so-called  need  in  certain  cases,  cheap  wage 
labor  in  others.  The  machine  is  destined  to  supply  it  in 
the  stage  into  which  we  are  now  entering.  It  has  the 
advantage  over  previous  stages  of  not  requiring  that  large 
numbers  of  human  beings  shall  be  doomed  to  a  life  of 
drudgery  in  order  that  others  may  be  relieved.  In  this 
new  age,  all  may  be  relieved  of  drudgery  and  all  may  have 
a  surplus  of  energy  with  which  to  do  what  they  like  to  do 
instead  of  being  compelled  to  do  what  physical  necessity 
commands.  This  must  be  accepted  as  a  real  step  In  pro- 
gress, even  though  the  energy  thus  released  should,  in 
part,  be  wasted  in  ludicrous  gambolings. 

Let  It  be  understood  once  for  all  that  If  we  are  to  have 
a  wide  diffusion  of  prosperity  among  all  classes,  the 
servant-keeping  class  must  dwindle  to  smaller  and  smaller 
numbers.  When  a  household  servant  expects  an  income 
comparable  with  that  of  the  head  of  the  household,  house- 
hold servants  are  an  impossibility.  They  are  definitely 
limited  to  those  households  whose  heads  have  Incomes  far 
in  excess  of  those  demanded  by  household  servants.  In 
this  respect  a  household  differs  fundamentally  from  a  pro- 
ductive industry.  In  the  latter,  it  is  quite  possible  that 
the  income  of  the  owner  may  really  be  less  than  that  of 
many  of  his  employees.  The  farmer's  is  frequently  less 
than  that  of  his  hired  man.  But  that  would  be  impossible 
in  the  consuming  unit  known  as  the  household.  Equality 
of  prosperity  means  precisely  that  the  incomes  of  house- 
hold servants  should  be  comparable  with  those  of  the 


HOW  LONG  WILL  IT  LAST?  403 

heads  of  households.  The  way  out  Is  not  to  breed  morons 
in  order  that  we  may  have  cheap  help;  It  Is  to  use  our  wits 
to  find  ways  of  getting  along  without  household  help  of 
any  kind. 

Electric  washing  and  drying  machines,  vacuum  clean- 
ers, and  a  number  of  other  mechanical  devices  are  already 
enabling  well  educated  and  well-to-do  women  to  get  along 
comfortably  without  the  washerwoman  and  the  char- 
woman who  formerly  had  to  work  to  support  their 
drunken  husbands.  By  changing  from  the  ceremonial 
meal,  the  fashion  for  which  was  set  by  a  leisure  class 
which  could  afford  numerous  servants,  to  a  simpler  one- 
course  meal,  where  everything  is  placed  on  the  table  and 
everyone  helps  himself,  we  shall  not  only  save  a  great  deal 
of  useless  labor,  but  be  better  and  more  wholesomely  fed 
besides.  One  welcome  evidence  of  the  revolt  of  youth  Is 
the  refusal  of  college  students  to  pay  the  stupidly  out- 
rageous price  for  board  which  Is  necessary  if  elaborate 
service  is  provided  at  the  present  high  wages  of  labor. 
They  wisely  prefer  the  lunch  counter,  the  cafeteria,  or 
even  the  "hot  dog"  stand,  where  they  pay  for  what  they 
want  and  are  not  compelled  to  pay  for  what  they  do  not 
want  In  the  form  of  elaborate  service. 

Even  our  domestic  architecture  Is  making  rapid  im- 
provement in  the  same  general  direction.  Houses  are 
seldom  constructed  nowadays  even  in  the  fashionable  sec- 
tions with  a  view  to  advertising  the  solvency  of  the 
occupier  by  their  size  and  the  visible  fact  that  it  requires 
a  great  deal  of  work  to  take  care  of  them.  The  old  type 
of  slum  is,  at  the  same  time,  disappearing.    The  houses 


404  THIS  ECONOMIC  WORLD 

of  the  well-to-do  are  being  built  more  and  more  with  a 
view  to  saving  steps  and  enabling  well  educated  and  well- 
to-do  people  to  live  without  servants  and  without 
drudgery.  They  are  noticeable  not  only  for  their  small 
size,  compact  form,  and  the  convenient  arrangement  of 
rooms,  but  for  the  labor-saving  features  that  are  being 
built  into  them.  Even  in  small  houses,  the  incinerator 
solves  the  great  problem  of  garbage,  dust,  and  waste 
paper,  chutes  and  dumb  waiters  connecting  different 
stories  from  attic  to  cellar  save  much  stair-climbing. 
Breakfast  nooks  in  kitchens  foreshadow  a  return  to  the 
old  New  England  kitchen  where  the  housework  and  the 
family  life  were  not  divorced. 

We  have  made  only  a  beginning  in  the  general  direction 
of  saving  steps  and  eliminating  drudgery  from  housework. 
The  ceremonial  home  life  that  requires  cheap  household 
service  for  its  very  existence  has  had  centuries,  nay, 
thousands  of  years,  to  fasten  itself  upon  us.  We  have 
been  less  than  a  generation  without  cheap  help.  While 
practical,  matter-of-fact  people  are  going  directly  about 
the  work  of  replanning  our  home  life,  many  romanticists 
are  doing  all  they  can  to  retard  it.  Having  only  a  sort 
of  racial  memory  to  guide  them,  with  very  little  construc- 
tive imagination,  they  cannot  see  how  the  new  life  can 
have  any  beauty  or  romance  in  it.  Only  that  which  has 
been  hallowed  by  time  and  rendered  romantic  by  being 
blended  with  old  memories  has  value  for  them.  How- 
ever, the  change  continues. 

It  is  objected  that  this  will  make  us  all  slaves  of  the 
machine.    That  it  will  make  us  more  and  more  dependent 


HOW  LONG  WILL  IT  LAST?  405 

upon  machinery  is  true,  but  we  shall  be  no  more  dependent 
upon  machinery  than  slave  owners  were  upon  their  human 
slaves,  or  than  well-to-do  persons  have  always  been  upon 
hired  help.  But  to  be  dependent  upon  some  person  or 
some  thing  does  not  make  us  the  slave  of  that  person  or 
that  thing.  If  it  did,  then  the  slave  owner  was  really  the 
slave  and  the  slave  the  master,  or  the  well-to-do  employer 
was  the  slave  of  the  low-wage  laborer  and  the  low-wage 
laborer  was  the  master.  Such  was  not  the  case,  and 
neither  can  a  machine  ever  become  our  master,  however 
much  we  may  be  dependent  upon  it. 

Others  find  an  objection  In  the  fear  that  we  are  coming 
to  be  dominated  by  things,  or  that  we  are  becoming  too 
much  obsessed  with  the  value  of  mere  things.  Before  we 
pronounce  the  word  "things"  In  too  scornful  a  tone,  we 
shall  do  well  to  consider  carefully  what  mere  things,  in 
the  sense  of  mechanical  contrivances,  have  contributed, 
passively,  to  the  larger  and  finer  life  of  the  present. 

Without  mechanical  contrivances,  our  ability  to  com- 
municate with  our  contemporary  fellow  beings  would  be 
limited  by  the  carrying  power  of  the  human  voice  and  the 
running  power  of  the  human  legs;  and  we  could  benefit  by 
the  thoughts  and  achievements  of  past  generations  only  In 
so  far  as  the  human  memory,  supplemented  by  oral  trans- 
mission, could  hand  them  down  to  us.  Even  books  and 
pictures  are  things.  They  carry  the  Impression  made  by 
those  who  thought  and  worked  at  one  time  down  to  later 
times.  They  are  therefore  a  means  by  which  men  who  live 
at  a  later  time  may  correlate  their  own  thoughts  and 
actions   with   the  thoughts   and   actions   of   those   who 


4o6  THIS  ECONOMIC  WORLD 

thought  and  worked  in  earlier  times.  They  vastly  enlarge 
the  possibilities  of  human  cooperation  both  in  space  and 
time. 

But  books  and  pictures  are  not  the  only — It  is  not  quite 
certain  that  they  are  the  most  important — pieces  of  ma- 
terial that  carry  the  imprint  of  one  generation  to  future 
generations.  Every  piece  of  durable  material  on  which 
anyone  has  ever  worked  does  that.  It  Is  this  ability  of 
certain  pieces  of  matter  to  carry  and  transmit  the  Im- 
pression of  man's  work  that  enables  large  numbers  of 
people,  widely  separated  In  time  and  space,  to  communi- 
cate with  one  another,  to  coordinate  their  labors  and  to 
make  whatever  approach  we  have  been  able  to  make  to- 
ward a  common  life.  The  long  line  of  inventors  and 
workers  who  together  made  a  machine  are  coordinating 
their  labor  with  that  of  the  one  who  uses  the  machine. 
Without  some  such  medium  as  the  tool  or  the  machine, 
the  general  collective  name  for  which  Is  capital,  each  indi- 
vidual either  would  have  to  work  alone  or,  at  best,  could 
cooperate  with  only  a  very  few  who  at  the  same  instant 
happened  to  be  together  in  one  place. 

He  whose  social  optimism  Is  not  stirred  by  thinking 
that  a  large  number  of  investors,  Inventors,  mechanics, 
and  common  laborers,  many  of  whom  have  long  ago  lived 
out  their  allotted  time,  are  really  helping  the  housekeeper 
of  today  with  her  housework,  relieving  her  of  the  fatigue 
which  she  or  her  servants  of  a  previous  generation  under- 
went, must  be  a  misfit  in  this  age  of  large  ideas. 

Of  course,  machines  are  not  everything.  A  modern 
Martha,  In  the  most  up-to-date  house,  with  every  known 


HOW  LONG  WILL  IT  LAST?  407 

mechanical  device  to  save  work,  may  lack  the  soul  of 
Mary;  but  frankly,  that  is  not  the  question.  The  question 
is,  given  the  soul  of  Mary,  would  the  fact  that  she  had  the 
benefit  of  labor-saving  devices  destroy  that  soul?  To  say 
yes  would  not  be  much  of  a  tribute  to  the  soul  of  Mary. 
These  devices  merely  relieve  the  bodies  of  the  Marys  and 
the  Marthas  of  much  drudgery  and  release  energy  which 
may  be  used  in  whatever  ways  their  souls  may  desire. 

It  is  interesting  and  probably  significant  that  the  things 
in  which  we,  in  this  country,  take  most  interest  are  not 
the  kind  that  are  to  be  passively  enjoyed.  Most  of  them 
require  action,  even  strenuous  action,  on  our  part  in  order 
that  we  may  get  any  satisfaction  out  of  them.  The  whole 
field  of  sport,  of  which  some  of  our  critics  think  that  we 
are  excessively  fond,  is  a  field  of  strenuousness  instead  of 
passivity.  The  kind  of  wealth  which  Americans  seem  most 
to  enjoy  is  not  the  kind  that  enables  them  passively  to 
register  pleasurable  sensations,  that  is,  it  is  not  to  be 
classified  as  consumers'  goods;  it  is  rather  the  kind  that 
they  must  actively  control  and  master  in  order  to  get  the 
thrills  which  they  enjoy.  Wealth,  with  us,  more  than 
most  other  people,  consists  of  instruments  of  production, 
and  we  use  them  productively  in  much  the  same  spirit  as 
that  in  which  a  sportsman  uses  the  instruments  of  sport. 
From  the  point  of  view  of  those  who  are  primarily  inter- 
ested in  consumption  in  the  narrower  sense,  we  are,  as  a 
nation,  poor  consumers.  We  are  not  interested  in  grace- 
ful consumption  and  elegant  leisure,  much  less  in  gour- 
mandizing.  Our  millionaires  are  not,  as  a  rule,  fat- 
necked,  pot-bellied  and  pop-eyed;  they  are  generally  lean 


4o8  THIS  ECONOMIC  WORLD 

men  who  might  easily  be  mistaken  for  hard  working  stu- 
dents who  burn  much  midnight  oil.  They  seem  to  suggest 
a  diet  of  crackers  and  milk  rather  than  of  rich  viands  and 
costly  wines. 

They  whose  interests  center  in  a  titillated  palate  and  a 
full  belly  rail  at  our  prosperous  men  for  not  enjoying 
their  wealth  more  than  they  do.  Such  minds  cannot  com- 
prehend the  superior  satisfactions  of  a  life  of  action  over 
a  life  of  passive  enjoyment.  It  is  fortunate  for  our  work- 
ing classes  that  prosperous  men  prefer  to  spend  their 
money  for  new  and  better  engines,  machines,  and  other 
instruments  of  production  rather  than  for  consumers' 
goods.  It  is  also  fortunate  that  our  successful  men  do  not 
retire  from  business  as  soon  as  their  barns  are  full,  saying, 
''Soul,  thou  hast  much  goods  laid  up  for  many  years;  take 
thine  ease,  eat,  drink,  and  be  merry."  They  keep  at  it, 
for  the  sheer  sport  of  it,  long  after  they  have  acquired 
enough  to  enable  them  to  retire.  This  results  in  the  mass- 
ing of  a  larger  quantity  of  high  intelligence  on  business 
problems  than  would  be  had  if  every  man  of  superior 
ability  were  to  retire  from  the  field  as  soon  as  he  was  able 
to  do  so.  The  latter  habit  would  tend  to  leave  industry 
in  the  hands  of  inferior  men  who  never  could  make  enough 
to  retire;  this,  in  turn,  would  result  in  inferior  industries, 
and  this  in  inferior  wages. 

Civilization,  in  one  of  its  many  important  aspects,  is 
the  utilization  of  surplus  energy.  The  character  of  a 
civilization  is  largely  determined  by  what  people  predomi- 
nantly do  with  their  surplus.  Some,  following  the  ex- 
ample of  the  plants  and  animals,  as  pointed  out  in  a 


HOW  LONG  WILL  IT  LAST?  409 

previous  chapter,  use  up  their  surplus  in  multiplication; 
this  results  in  overpopulation.  Some  use  their  surplus  in 
leisure;  this  results  in  general  stagnation  and  torpor. 
Some  use  their  surplus  in  luxurious  consumption;  this  re- 
sults either  in  gluttony  and  bestiality  or  in  the  arts  and 
graces  of  elegant  luxury.  Some  use  their  surplus  in  action; 
this  results  either  in  highly  developed  sports,  or,  if  they 
take  their  sport  in  the  form  of  business  activity,  in  highly 
developed  industry  and  much  buying  of  the  engines  and 
machines  of  production.  If  the  latter  is  carried  out  to 
its  logical  conclusion,  it  results  in  the  piling  up  of  all  in- 
struments of  production  whose  collective  name  is  capital, 
the  disappearance  of  interest,  and  giving  to  the  workers 
the  entire  product  of  industry  in  the  form  of  wages, 
salaries,  and  profits. 

Men  of  action  who  undertake  big  things  sometimes 
require  big  tools.  Columbus  required  ships  for  his  big 
undertaking,  and  ships  in  that  day  were  big  and  expensive 
tools.  The  artist  also  needs  tools,  but  they  are  not  usually 
big  or  expensive.  Palette  and  brush,  mallet  and  chisel, 
do  not  require  large  Investments  of  capital.  But  that  is 
no  reason  why  those  who  use  such  things  should  call 
Columbus  a  mercenary  person  because  he  sought  large 
sums  of  money.  The  thing  that  Is  done  with  money,  not 
its  quantity,  Is  the  thing  which  we  should  weigh  and  con- 
sider. Columbus  wanted  larger  and  larger  fleets  in  order 
that  he  might  carry  out  larger  and  larger  operations.  To 
one  who  saw  no  significance  In  those  operations,  but  saw 
only  that  he  was  always  asking  for  more  and  more  equip- 
ment, he  must  have  seemed  mercenary  and  grasping. 


410  THIS  ECONOMIC  WORLD 

Nor  is  it  certain  that  Columbus  was  more  benevolent 
or  less  self-interested  than  many  a  modern  enterpriser. 
He  seemed  to  crave  the  high  esteem  of  the  world  and  to 
desire  to  make  a  great  name  for  himself  and  his  family. 
He  even  tried  to  leave  a  great  estate  for  that  family. 
There  is  not  the  slightest  reason  to  believe  that  his 
motives  differed  essentially  from  those  of  many  another 
great  enterpriser  of  that  and  later  days.  They  are  all 
worthy  of  vastly  more  respect  and  consideration  than 
those  whose  chief  interest  is  in  what  is  commonly  called 
consumption,  or  in  the  use  of  material  things,  not  as  tools 
for  great  achievement,  but  as  means  of  gratifying  one  of 
the  five  senses. 

But  why  should  modern  enterprises  require  such  large 
and  expensive  tools  ?  The  ancient  and  the  medieval  world 
got  along  without  them  and  did  some  things  better  than 
the  modern  world  can  do  them.  To  say  nothing  of  the 
fine  arts  as  they  are  now  defined,  finer  work  was  done  in 
many  other  fields  of  endeavor  than  can  now  be  done  with 
our  huge  machines.  More  beautiful  books,  for  example, 
were  made  by  hand  than  any  printing  press  can  turn  out. 
The  same  formula,  with  verbal  variations,  can  be  used  in 
a  multitude  of  other  cases. 

One  thing,  however,  none  of  those  hand  methods  could 
do,  either  then  or  now.  They  could  not  provide  those 
desirable  things  for  the  masses  of  the  people.  Those 
beautiful  products  of  hand  work  were  available  only  for 
the  few  very  rich  people  who  could  afford  to  pay  for 
them.  The  book  is  a  good  example.  The  printing  press, 
with  its  movable  type,  gave  us  the  first  great  example  of 


HOW  LONG  WILL  IT  LAST?  4" 

mass  production  with  interchangeable  parts.  It  cannot 
produce  such  beautiful  results  as  some  of  the  Illuminated 
manuscripts  of  the  days  of  hand  work,  but  it  does  place 
books  within  the  reach  of  everyone.  By  similar  means, 
shoes,  clothing,  glazed  dishes,  chairs,  tables,  bathtubs, 
canned  fruits,  fresh  meat,  wheat  bread,  watches,  cameras, 
telephones,  pianos,  victrolas  and  radio  sets,  and  a  host  of 
other  things  In  bewildering  number  and  variety  are  pro- 
vided for  everybody. 

So  much  must  be  admitted,  but  the  pessimist  will  not  be 
robbed  of  his  grievance.  He  still  asks,  are  these  things 
worth  while?  He  is  never,  however,  fair  in  his  compari- 
sons. He  Is  likely  to  compare  the  state  of  the  few  who 
could  enjoy  the  rare  and  beautiful  things  of  the  past  with 
that  of  the  many  who  can  now  enjoy  the  cheap  and 
abundant  things  of  the  present.  That  is  not  a  true  com- 
parison. He  should  compare  the  lot  of  the  many  who, 
in  the  past,  could  enjoy  neither  the  rare  and  beautiful 
things  of  that  time,  nor  the  cheap  and  abundant  things  of 
today,  with  the  many  of  today  who  at  least  enjoy 
abundance. 

If  one  who  now  rhapsodizes  over  the  glories  of  a 
medieval  town  were  compelled  to  live  in  a  medieval  town, 
neither  as  the  nobility  and  the  rich  burghers  lived,  nor  as 
the  very  poorest  lived,  but  as  the  common  run  of  the 
people  lived,  he  would  soon  be  disillusioned.  It  is  to  be 
regretted  that  he  cannot  be  subjected  to  that  test. 

The  kinds  of  enterprise  which  produce  an  abundance  of 
more  or  less  desirable  things  and  put  them  within  the 
reach  of  masses  of  people  all  require  large  and  expensive 


412  THIS  ECONOMIC  WORLD 

tools,  much  larger  and  more  expensive  than  Columbus 
required  for  his  great  enterprise.  That  is  really  all  there 
is  to  this  so-called  capitalistic  system,  to  distinguish  it 
from  that  which  preceded  it.  Both  have  been  based  on 
private  ownership.  The  size  and  costliness  of  the  tools 
have  increased.  The  joint  stock  form  of  organization  and 
the  method  of  voluntary  cooperation  provide  the  means 
by  which  these  great  and  costly  aggregations  of  tools  can 
be  owned  and  operated  under  the  system  of  contract  or 
voluntary  agreement,  without  resorting  to  the  method  of 
authority  and  obedience. 

But  will  not  this  accumulating  prosperity  eventually  be 
too  much  for  us  and  break  down  the  morale  of  civiliza- 
tion? Much  has  been  said  and  written,  in  a  vein  of  high 
moral  seriousness,  on  the  uses  of  adversity,  the  Pentecost 
of  calamity,  and  the  purifying  furnace  of  affliction.  It  is 
time  for  us  to  begin  thinking,  in  the  same  vein  of  high 
idealism,  about  the  uses  of  prosperity.  Prosperity,  like 
adversity,  is  selective;  it  is  a  winnowing  fan  which  sepa- 
rates the  wheat  from  the  chaff.  Some  are  improved  by 
adversity,  but  others  are  demoralized  by  it.  The  same  is 
true  of  prosperity.  In  a  remarkable  sermon,  delivered 
during  the  darkest  days  of  the  World  War,  Professor 
Jack  pointed  out  that  adversity  and  affliction  were  not  in 
themselves  good,  but  when  nobly  borne  usually  brought 
good  in  their  train,  whereas  when  ignobly  borne  they 
could  bring  only  evil.  This  also  might  be  said  of  pros- 
perity. There  is  no  reason  why  it,  when  nobly  borne, 
should  not  bring  even  greater  good  than  adversity. 

Men  have  been  more  carefully  schooled  for  adversity 


HOW  LONG  WILL  IT  LAST?  413 

than  for  prosperity.  During  the  greater  part  of  the  life 
of  man  on  this  earth,  he  has  had  a  constant  fight  with 
adversity  and  has  acquired  considerable  experience  to  help 
him  In  his  fight.  He  has  not  had  time  to  accumulate  any- 
thing like  the  same  experience  In  meeting  the  problems  of 
prosperity.  All  his  moral  and  religious  systems  that  have 
been  of  any  use  to  him  have  provided  him  with  disciplines 
against  the  demoralizing  tendencies  of  poverty  and  ad- 
versity. Where  he  has  lived  up  to  these  disciplines,  they 
have  fortified  him,  and  neither  poverty  nor  adversity 
could  break  him.  Special  classes  have  here  and  there 
escaped  from  adversity  only  to  come  In  contact  with  the 
demoralizing  Influences  of  prosperity.  There  Is  not  and 
never  has  been  a  religion  or  a  moral  discipline  that  for- 
tified the  prosperous  classes  against  these  new  dangers  as 
the  old  religions  and  moral  disciplines  had  fortified  them 
or  their  ancestors  against  the  old  dangers.  Consequently, 
every  aristocracy  which  the  world  has  ever  known  has 
been  a  decaying  aristocracy.  It  has  either  disappeared 
or  has  been  nominally  preserved  by  constant  recruiting 
from  below. 

For  the  first  time  in  history  the  masses  themselves,  in 
this  country,  are  emerging  Into  a  condition  of  prosperity 
comparable  to  that  of  the  aristocracies  of  any  previous 
age.  They  have  neither  practical  experience,  nor  a  re- 
ligion, nor  a  moral  discipline  that  was  ever  designed  to 
fortify  them  against  these  new  dangers.  Every  religion 
that  amounts  to  anything  started  among  the  poor  and  the 
afflicted.  It  flourished,  if  It  did  flourish,  because  It  pre- 
served its  people  In  the  midst  of  their  poverty  and  their 


414  THIS  ECONOMIC  WORLD 

afflictions.  It  gave  them  a  discipline  which  kept  them 
true  to  the  basic  principles  of  right  living  in  spite  of  the 
hardships  which  they  had  to  endure.  Hardship  could  not 
break  them.  Every  modern  sect,  even  Christianity,  has 
had  the  same  origin  and  has  flourished,  if  it  did  flourish, 
for  the  same  fundamental  reason. 

But  a  new  thing  has  happened  in  this  country.  There 
are  no  longer  any  poor  as  that  word  was  once  understood. 
There  are  none  who  need  the  old  discipline  because  they 
are  not  facing  the  old  danger.  A  new  danger,  for  which 
they  have  no  discipline,  is  upon  them.  Our  civilization, 
or  our  branch  of  the  human  race,  is  facing  a  crisis.  Unless 
it  can  speedily  acquire  the  necessary  experience,  or  unless 
some  religious  or  moral  discipline  can  be  provided  and 
made  effective  through  great  preaching,  that  is,  preaching 
by  men  who  not  only  see  the  crisis  but  can  appeal  with 
such  passionate  and  overpowering  eloquence  as  to  turn 
the  masses  from  the  evils  that  always  attend  prosperity, 
the  masses  themselves  will  go  the  way  of  all  prosperous 
classes.  They  will  succumb  to  the  same  evils  which  have 
destroyed  all  aristocracies. 

Many  will  succumb  to  these  evils  in  spite  of  all  that  can 
be  done.  The  hope  is  that  a  remnant  can  be  saved  from 
the  general  demoralization  to  serve  as  the  seed  of  a  new 
civilization.  After  all,  this  is  the  way  of  all  progress. 
It  is  the  method  of  trial  and  error,  of  variation  and  selec- 
tion, of  evolution.  In  the  days  of  adversity,  they  who 
were  broken  by  it  disappeared  in  pauperism,  vice,  and 
criminality.  •  Only  those  who  were  strengthened  by  it 
ever  succeeded  in  conquering  it  and  lifting  themselves 


HOW  LONG  WILL  IT  LAST?  415 

above  it.  The  same  will  be  true  in  the  coming  days  of 
prosperity.  Some  will  run  amuck,  as  those  just  out  of 
bondage  have  always  done,  celebrating  their  recent  escape 
from  the  backwoods,  the  slums,  or  the  Ghetto  by  throwing 
off  the  shackles  of  Methodism,  Quakerism,  Puritanism, 
and  Judaism  and  seeking  new  sensations  in  various  forms 
of  physical  and  spiritual  self-indulgence,  ranging  all  the 
way  from  physical  gluttony  to  salacious  novels  and  weird 
forms  of  art.  Others,  like  good  sports,  may  take  their 
prosperity  modestly  and  thankfully,  with  a  feeling  of 
noblesse  oblige,  still  cultivating  in  themselves  the  funda- 
mental virtues  of  industry,  sobriety,  thrift,  and  domes- 
ticity, even  taking  the  vow  of  poverty  in  a  modern  and 
constructive  sense  by  regarding  all  their  wealth  as  tools 
to  be  used  in  further  production  rather  than  as  means  of 
self-indulgence.  These,  if  they  exist  in  sufficient  numbers, 
will  be  the  preservers  of  what  is  good  in  the  old  civiliza- 
tion and  the  builders  of  the  new. 


INDEX 


INDEX 


Abortion,  aspect  of  high 

death  rate  26,  34 

Action 

freedom  of,  under  law  181 

ideal  of  99,  128,  407-408 

Adamson  Law  243 

Adversity,  uses  of  412-413 

Agreement 

see  Voluntary  agreement 
Agriculture 

acreage  per  capita  in  292-293 

acreage  per  worker  in  61 

in  United  States,  present 

state  of  293 

increase  of  acreage 

used  in  293,  330 

index  figures  of  comparative 

productivity  in  61 

limitation  of  mechanical 

devices  in  23 

occupational  congestion  in  299 

production  and  use  of 

power  in  388 

ratio  of  labor  to  quantity 

of  land  in  330-331 

see  also  Cultivation ;  Dimin- 
ishing returns ;  Land 
Alcoholism 

see  Intemperance  ;  Prohibition ; 
Sobriety 
Amendments,  Constitutional 

see  Constitution 
American  Telephone  and 
Telegraph  Company, 
stockholders  of  379 

Animal  power  22 

Authoritarianism 

and  Bolshevism  118-121 

either  conservative  or  radical     123 


in  England  and 

France  112-113,  114 

Authority 

disposition  to  escape 

from  173.  178-179 

proper  exercise  of  127-128, 

181,  183-188 

restriction  of  choice  under   188-189 

Automobile  industry  372-373 

B 

Balance  of  nature,  an  illustration 

of  static  condition  44*45 

Bargaining  power 

equalized  by  occupational 

redistribution  263 

inverse  to  political  power     174-175 
of  men  politically  and 

economically  free  262 

of  necessitous  man  261 

Belgium,  productivity  per 
worker  in 
in  agriculture  61 

in  coal  mining  386 

Bill  of  Rights,  in  United  States 

constitutions  225,  227 

Biological  family  29 

see  also  Family 
Birth  control  13,  34 

by  marriage  285 

Birth  rate 

a  physiological  function  25-26 

and  death  rate  6-7 

balance  of,  in  stationary 

population  25 

and  standard  of  living  287- 

288,  395 
control  of,  by  parental 

responsibility  26-27,  285 


419 


420 


THIS  ECONOMIC  WORLD 


Birth  rate  (continued) 
differential,  a  menace  308-309 

graphic  illustration  of  310 

remedy  for  311 

"natural"  6,  26 

not  controlled  under 
promiscuity  34 

Blackstone,  quoted  220 

Bolshevism  and  Authorita- 
rianism 118-121 
British  Labor  Party         114,  116-118 
Brotherhood  of  Locomotive 
Engineers  Cooperative 
National  Bank  381 
Building  and  loan 

associations  374-375.  376 

Business 

check  on  overexpansion  of  340-341 
predatory  and  productive 

methods  in  20 

prejudice  against      57-59.  77.  396 
Business  cycle  340 

Business  management 
see  Managers ;  Management 


Capital 

accumulation  of 

and  encouragement  of 

industry  358-360 

in  small  sums  374 

and  productivity,  correlation 

between  61 

as  tool  of  service  106-108 

ceasing  to  be  a  fixed  charge 

in  industry  347 

control  of  I99.  200, 

201,  217-218 
effect  of  abundance  of  347,  358 
effect  of  increase  of 

demand  for  327-328 

excess  of  348 

exports  and  imports  of  393 

in  mechanical  instruments 

of  production  355.  407.  409 

not  predatory  19 


ownership  of  177 

see  also  Ownership 
scarcity  of,  a  hindrance  to  occu- 
pational redistribution  51,  60-61 
see  also  Wealth 
Capitalism 

does  not  develop  into 

communism  118-119,  176 

founded  on  intelligence  and 

thrift  119 

Capitalist  class,  disappearance 

of  income  of  349 

Capitalist  system,  characterized 

by  costliness  of  tools  412 

Capitalists 

see  Enterprisers 
Celibacy  314 

Centennial  Exposition,  a 

landmark  369 

Children 

responsibility  for  support  of    33-34 
see  also  Parenthood 
China,  family  system  in  34 

Civilization 
definition  of  361 

expanding  and  pent-up 

types  of  291-292 

"machine-made,"  emancipates 

from  drudgery  401 

prehistoric,  cause  of  dis- 
appearance of  65-66 
the  utilization  of  surplus 

energy  408-409 

Coal  mining 
occupational  congestion  in  299-300 
productivity  per  worker  in, 

U.  S.  and  other  countries         286 
Colleges  and  universities 
attitude  of,  toward 

business  S7-S8,  59,  77.  397 

endowments  of,  in  United 

States  367 

Colonization  and  dispossession 

of  weaker  races  8-9,  14 

Columbus,  a  type  of 

enterpriser  409-410 


INDEX 


421 


Communal  property  of  the 

biologic  family  30 

Communism  30,  33,  34, 

36,  52-53,  80,  113 
compulsory  172 

misuse  of  term  "liberal"  by         122 
not  developing  out  of 

capitalism  118-119,  176 

will  not  eliminate  competition    144 
voluntary  170,  17a 

Communistic  societies  in  the 

United  States  170,  171 

reasons  for  failures  of  172 

Competition 

an  expression  of  human 

nature  142,  143-144,  170 

a  "survival"  factor  in 

evolution  149 

among  producers  20,  139 

and  amusements  143 

and  the  Golden  Rule  89 

economic,  distinguished  from 

brute  struggle  139,  150 

free  or  unrestricted,  a 

misnomer  139 

high  standards  of  160 

is  it  an  evil  ?  86-89 

political  141 

wastes  of  141 

Competitive  spirit 
can  it  be  eradicated  ?  143- 

146,  149-150 
not  a  product  of  environment  146 
to  be  harnessed  to 

productivity  146,  149 

Competitive  system,  the  138-167 

Conduct,  standards  of 

see  Standards  of  conduct 
Conflicts  of  interests  80-83 

Congestion  of  population  34, 

297-298 
Congestion,  occupational 

see  Occupational  congestion 
Conservative  and  conserva- 
tionist 122-123 


Constitution  of  the  United  States 
amendments  to 

Fifth  225,  227 

Fourteenth  227,  237,  238, 

250,  258,  259,  264 
Nineteenth  252 

Bill  of  Rights  in  225,  227 

Consumption 

and  production  94-95,  99-100 

inequalities  in  200-201 

Contract 
freedom  and  opportunity 

secured  by  264 

opposition  to,  as  a  form  of 

coercion  185,  187-188 

Contract,  freedom  of 

see  Freedom  of  contract 
Contracts 

adequacy  of  consideration 

in  267-268,  273-274 

cancellation  of,  by  courts      270-276 
enforcement  of  184 

inequitable,  not 

enforceable  266-267 

specific  performance  of        265-270 
under  duress,  voidable  271 

undue  influence  in  271-273 

with  necessitous  man  as  party    265 
Control 
concentration  of  199,  217-218 

inequalities  in  200-201 

Cooperation 
compulsory  80,  139, 

140,  141,  170 
lack  of  Interest  in  142-143 

voluntary  140 

possible  under  present 

economic  system  170 

Copper  mines,  in  U.  S.,  power 

and  output  per  man  in  385 

Copyrights  and  patents,  utility  of    84 
Cost  theory  of  value  207,  208 

Crime  and  standards  of 

conduct  150-151 

Criminals 
partial  sterilization  of         311-312 


42  2 


THIS  ECONOMIC  WORLD 


Criminals  {continued) 
proper  treatment  of  313 

Cultivation  of  land 

diminishing  returns  in  12 

see  also  Diminishing  returns 
intensive  29S 

meaning  of  lo-ii 

see  also  Agriculture  ;  Land 

Custom,  authority  of  132-133 

D 

Damages,  suits  for  276-278 

Dark  Ages  314-31S 

Death  rate  * 

decline  of,  in  United  States, 

1880-1924  364-36S 

"natural"  6-7 

natural  control  of  birth 

rate  by  25-26 

see  also  Birth  rate 
Declaration  of  Inde- 
pendence 223-224 
Degenerates,  physical  sterility  of   311 
Democracy 

and  liberalism  in  govern- 
ment 125-126 
and  volutary  agreement  173 
not  necessarily  liberalism     123-124 
see  also  Jeffersonian  Democracy 
Democratic  Party  113 
Despotism,  protection  of 

production  by  17,   18-19 

De  Tocqueville,  quoted  190 

Diminishing  returns 

in  cultivation  of  land     12,  282-283 
graphical  illustration  of  295-297 
Division  of  labor 

and  occupational  congestion       298 
cause  of  lack  of  occupational 

balance  39-43 

illustrations  of  42-43 

problems  created  by  39,  42 

see  also  Specialization 
Drunkenness 

see  Intemperance ;  Prohibition ; 
Sobriety 


Due  process  of  law         225,  226,  228 
essentials  of  231-233 

judicial  interpretation  of      229-233 
no  comprehensive  definition 

of  228-230 

rights  protected  by  233-235 


Economic  functions,  balancing 

the  (Extrication  No.  7)         38-63 
summarized  61-63 

Economic  law  280-281 

Economic  principles,  uni- 
versality of  37,  67,  103 
Economic  reform 

by  removal  of  hindrances  to 

economic  forces  41,  43,  44 

not.2ilaissezf aire  ^oWcy  51 

Economic  system,  the  present  38 

an  orderly  system  72 

in  what  sense  individualistic      169 

is  it  "somehow  good?"    70,108-109 

lack  of  understanding  of  39 

not  yet  perfect  78-83,  103 

perfectability  of         74,  78-79,   109 

question  of  the  future  of  87-88 

wisdom  of  preserving  79,  80 

Economic  tendencies  and 

historical  facts  75-76,  no 

Economists,  personal  bias  of  73 

Education 

and  preservation  of  present 

prosperity  76-77 

and  self-development,  in  the 

United   States  93 

attacks  on,  dangerous 

to  labor  397-398 

expenditures   for,   in 

United  States  365-366 

lack  of,  a  hindrance  to 
occupational  redistribu- 
tion 51,  52 
to  raise  standard  of  living        289 
to  restore  occupational 
balance 

41-42,  43,  53,  55,  166,  301 


INDEX 


423 


Educational  ideals  of 

United  States  93.  3^8 

Educational  policies, 

aims  of  329-330 

Electrical  power  389-390 

Elegance,  ideas  of,  largely 

traditional  307-308 

Eminent  domain  255-256 

England 

effect  of  Labor  Party's 

policy  in  117 

liberalism  in  no,  112 

type  of  "expanding" 

civilization  292 

wealth  in,  per  capita,  1923       363 
see  also  Great  Britain 
Enterprisers,  technicians,   and 
capitalists 
competition   among  349 

effect  of  dearth  of  324 

effect  of  training  of  395-396 

export  and   import  of         325-326 
increase  in  number  of 

60,  320,  323,  324,  325 
will  result  in  lower 
interest,  profits  and  salaries  332 
increase  in  quality  of         323-324 
Equality 

desire  for  190 

economic  190-219 

bases  for  determining       193-194 
meaning  of  191 

of  condition  194-195,  197 

among  occupations 

197,  203,  206-207,  338 

between  persons  197 

of  enjoyment  198,200-201,217,219 

of  opportunity  194-195,  196 

Equality  before  the  law  220-260 

in  American  constitutions    224-225 

Equilibrium  of  supply  and 

demand  44 

Equilibrium  price  45*46 

graphic  illustration  of 

333-334, 335-337 


Equilibrium  wage  46-47.  60 

affected  by 

immigration  47-49, 332-333 

affected  by  standard 

of  living  49,  332-333 

graphic  illustration  of  33S 

interference  with,  by 

artificial  regulation  338-339 

progressive  rise  of         343,  359-360 
raised  by  education  of 

lower  wage  groups  53*55 

Equipment  in  industry 

see  Industrial  equipment 
Equity  in  interpretation  of 

contracts     266,  268,  269,  272,  277 
Esteem 

see  Social  esteem 
Extravagance 

77-78,356,373,381,397 
of  new  rich  400 

Extrications  from 

want  7,9,13,14,21,24,38 


Family 

and  definite  parental 

responsibility  33-34 

biological  29 

creation  of  legal,  by  marriage      29 

monogamic  30, 35 

patriarchal  33-34 

Family  property  29-30,  35 

Federal  Reserve  Board  341 

Feeble-minded 

and  labor  reserve  35o-35i 

menace  of  303-304 

Feudalism,  part  played  by  182 

Fifth  Amendment  225,227 

Finney,  Ross  L.,  quoted  320-322 

Flux,  A.  W.  383 

Food 

and  the  struggle  for  existence        4 
derived  by  commerce  from 

wider  areas      9,  24,  289,  290,  292 
limit  to  sources  of  23-24 

see  also  Subsistence 


424 


THIS  ECONOMIC  WORLD 


Fourteenth  Amendment 

227,  237,  238,  250,  258-259.  264 
France 

liberalism  in  iio-iii 

productivity  per  worker  in 

in  agriculture  61 

in  coal  mining  386 

wealth  in,  per  capita,  1923 

Franklin,  Benjamin  102 

a  forerunner  of  Malthus  289 

Fraud,  in  contracts  271,272,274 

Freedom 

limitations  on,  necessary 

for  larger  freedom  184-185 

under  restraint  of  law 

181,  184,  228,  237,  240-241 

various  concepts  of  120 

Freedom  of  contract  131,263 

in  relation  to  labor  250 

nothing  yet  found 

superior  to  136-137 

regulated  by  law  265 

restriction  of,  necessary  185 

under  due  process  of  law  234 


G 


Galton,  Francis 
quoted 

Gasoline  engine, 

a  source  of  power 

205 
314 

23, 385-386 

Germany 

productivity  per  worker  in 

in  agriculture                             61 
in  coal  mining                         386 

wealth  in,  per  capita,  1923          363 

Government 
and  predation 

16-17 

coercion  by                                    in 
properly  used             181,183,188 
competition  in                               141 
distinction  between  democ- 
racy and  liberalism  in      125-126 

Golden  Rule,  and  competition         89 

Great  Britain 

productivity  per  worker  in  61 

in  agriculture  61 

in  coal  mining  386 

in  steel  industry  384-385 

see  also  England 

Greatness  through  service   95-97,  161 

Gunpowder,  a  source  of  power        22 


H 
Hadley,  A.  T. 
Homestead  Law 
Horse  power  per  worker 
Hungary,  productivity  per 
agricultural  worker  in 


20,30 

299 

61,383 

61 


Immigration 
cause  of  overdevelopment 

of  agriculture  299 

effect  of,  on  demand 

for  labor  47-49,344,369,370 

into  United  States,  1871-1924     364 
Immigration 

restriction  48,49,63,331,357 
and  the  labor  reserve  318,319,331 
attacks  on,  dangerous  to  labor  397 
effect  of 

in  higher  wages        332,  370,  394 
on  slums  76 

only  partial  as  yet  382 

should  be  supported  by 

workingmen  394 

to  control  migration  of 

laborers  326 

Improvident  peoples, 

danger  from    32,34,35-36,66-69 
Income 

inequalities  in  199,  200 

national,  change  in 

distribution  of  337-338,  349 

Independence 

desire  for  345 

of  wage  workers   342,  343, 344,  346 

Individualism  168-169 


INDEX 


425 


Industrial  equipment 

and  productivity,  correla- 
tion between         61,326-327,331 
three  things  required  by  327 

Industrial  reserve  army  316-351 

see  also  Labor  reserve 
Industry 

effect  of  expansion  of  325,359 

ratio  of  labor  to  equipment  in     331 
Inequality,  caused  by  special- 
ization of  occupations  39-42 
see  also  Occupational  balance 
Infanticide,  aspect  of  high 

death  rate  26,  34 

Institutionalism  169 

Insurance 

see  Life  insurance 
Intemperance 

a  hindrance  to  occu- 
pational redistribution  51,  56,  63 
control  of  77,382 

destroys  dependability 

SI,  56,  63, 102 
see  also  Prohibition ;  Sobriety 
Interest 

equilibrium  rate  of  336-337 

permanently  lower  rates  of         332 
pure,  or  net,  disappearance  of 

328,  348-349,  359,  409 
tendency  of,  to  decrease 

324,  32s,  358,  359 
Invention  (Extrication  No.  5)     21-24 
limitations  of,  as  extrication 

from  want  24 

Inventor 

dependence  of,  on  investor  355-356 
and  investor  353-354 

Investor,  dependence  of, 

on  inventor  358 

Iron  mines,  in  U.  S.,  power  and 

output  per  man  in  384 

Italy 

effect  of  Mussolini's  policy  in      116 
productivity  per  agricultural 

worker  in  61 

see  also  Mussolini 


Jeffersonian  Democracy  112,  113 

Johnson,  Alvin  S.  37 

Jurisdiction  of  courts  233 

Justice 

ideals  of  97 

inherent  in  our  Economic 

system  72,  161 

Justice,  social  92,  97,  390 

and  utility  theory  of  value  212,214 

not  charity  97 

principles  underlying    104-105,  161 

difficulty  of  applying        162,-163 

qualifications  to 

statement  of  163,  164-166 


Labor 

as  a  fixed  charge  on 

industry  346, 347 

assumed  mobility  of  52 

cheap 

assumed  need  for  304,319 

efforts  to  increase 

supply  of  397-398 

exports  and  imports  of  393 

freedom  of  contract  relating  to  250 
immobility  of  44>  5° 

manual 

migration  of,  to  industrial 

countries  32S 

oversupply  of 

75.77,175,324,329 
political  power  of,  stronger 

than  bargaining  power        174 
scarcity  of  32S 

principle  of  distribution  of  13S-136 
ratio  of,  to  land  and 

equipment  330-331 

scarcity  of,  and  independence 

of  workers  344 

see  also  Division  of  Labor ; 
Labor  reserve;  Occupational 
redistribution;  Specialization 
Labor  banks  374, 380-381 


426 


THIS  ECONOMIC  WORLD 


Labor  Party,  British 

see  British  Labor  Party 
Labor  reserve 

and  business  cycles  340,  341 

assumption  of 

need  for  316-317,318,320 

not  required  by  profits  system     342 
of  part  time  labor  339-340,  342 

resuhs  from  interference 

with  economic  system  339 

Labor  Unions 

banks  maintained  by     374,380-381 
interference  by,  with 

equilibrium  wage  338-339 

Laborers, 

independence  of        342, 343,  344 
Laissezf  aire  policy  120 

Land 

and  labor,  ratio  between, 

in  agriculture  330-331 

cultivation  of  9-10 

limited  productivity  of  6,  7-8 

public,  use  of,  in  United  States   367 

Language  as  code  of  signals        13-14 

Law 

due  process  of 

see  Due  process  of  law 
equal  protection  of        227,  228,  230 
more  inclusive  than 

"due  process"  237 

equality  under  191 

see  also  Equality  before  the  law 
freedom  under  181,  184,  228 


"person"  in 

227,  239 

Law  of  nature,  theory  of 

221-223 

in  Declaration  of 

Independence 

224 

Law  of  the  land 

226 

Leisure  class  98-99,  304,  319, 

381,402 

Lenin 

11S-118 

Liberalism 

and  democracy 

in  government 

125-126 

not  identical 

123-124 

and  heterodoxy,  not 

identical 

124-125 

and  standard  living  289 

antithetical  to  communism 

and  socialism  122 

difficulty  of,  as  continuous 

party  policy  120 

economic  importance  of       126-130 
meaningof  112,121-126 

opponents  of  130 

recent  history  of  110-115 

Liberty 

"natural"  180 

protected  by  due  process 

of  law  233,  234 

see  also  Freedom 
Life  insurance  202,374,378-379 

Locke,  John,  influence  of 

philosophy  of  223-224 

Luxuries  for  the  masses 

371,373,374.381,399 


M 


114, iis-iif 


326-327 
410-41 1 

305,307 


304-305,  401 


MacDonald,  J.  Ramsay 
Machine  production 
high  wages  associated 

with 
mass  production  from 
scale  of  consumption 
supported  by 
Machinery 

modern  substitute 

for  slaves 
relief  by,  from  drudgery       401-403 
MacPherson,  Walter  Henry, 

quoted  71 

Magna  Carta  223,226 

Maine,  Sir  Henry  168,  182 

quoted  131 

Malthus,  Thomas  Robert  281 

doctrine  of  282-289 

Malthusianism  26 

Man 

a  predatory  animal  15 

checks  on  physiological 

increase  of  282 

the  standard-setting  animal       150 


INDEX 


427 


Man  power,  productive  utiliza- 
tion of  381-382 
Management,  irresponsi- 
bility in  177-178 
Managers 

effects  of  premature  retirement 

of  59-60,98-99,381-382,408 

jealousy  of,  a  hindrance  to 

prosperity  77, 396 

lack  of,  a  hindrance  to  occupa- 
tional redistribution        51,  S7-60 
need  of  developing  395-306 

Marriage  27-29,82-83 

and  parental  responsibility  33 

between  whites  and 

negroes  253-254 

birth  control  through  285 

postponement  of,  for  higher 

standard  of  living  49,  63 

Marx,  Karl 

fundamental  mistake  of  19,  175-176 
wrong  prediction  of,  as  to 

ownership  of  capital  177 

Materialism  in  the  United  States 

91-92,  93,  94,  102-103,  105,  367 
Mexico 

attitude  of,  toward  church, 

not  liberal  125 

field  for  authoritarian 

propaganda  119, 177 

low-wage  labor  from 

76,326,382-383 
should  be  restricted  351 

natural  resources  of  393 

Migration  12, 282 

controlled  by  nationalism  31 

not  always  possible  25 

population  stress  temporarily 

relieved  by  291-292 

see  also  Scattering 

Mill,  John  Stuart,  quoted         283-284 

Minimum  wage  law  312 

Monopoly  82 

due  to  special  skill,  illustration 

of  41 


Moral  standards 

see  Standards  of  conduct 
Morons 

see  Feeble-minded 
Mount  Vernon  Savings  Bank  380 

Munsey,  Frank  A.,  quoted  48 

Mussolini  115-118, 142,  190 

N 

National  territory,  defense  of      31-32 
Nationalism 

and  the  problem  of  poverty     36-37 
control  of  migrations  by  31 

protection  of  subsistence  by  31 

Natural  birth  rate  and  death 

rate  6-7 

Natural  liberty  180 

Natural  resources  in 

United  States  368 

abundance  of,  to  be  discovered   396 
and  diffusion  of  wealth  393 

Necessitous  men  not 

free  185-186,  261 

New  South  Wales,  productivity 

per  coal  miner  in  386 

Nineteenth  Amendment  252 

Worthington,  Lord,  quoted  261 


Occupational  balance,  illustra- 
tions of  lack  of 

40-42,42-43,  164-165 
Occupational  congestion 

166,  263,  298-301 
in  agriculture  299 

in  coal  mining  299-300 

in  European  countries  300-301 

not  controlled  by  standard  of 

living  303 

relieved  by  occupational 

redistribution  301-302 

Occupational 

redistribution  44,  54,  76-77 

bargaining  power  equalized 
by  263 


428 


THIS  ECONOMIC  WORLD 


Occupational  redistribution 
(continued) 
breeding  and  heredity  in  308 

hindrances  to  50-51,51-61 

see  also  Labor,  distribution  of 

Organization  (Extrication  No.  3)    13 

Overcrowding,  caused  by  defec- 
tive family  systems  34 

Overexpansion,  automatic 

check  on  340-341 

Overpopulation  34,  297,  298 

Overproduction  348-3S9 

Ownership 

concentration  of  218 

control  of  202 

diffusion  of  199 

inequalities  in  199,  200,  201 


Parenthood,  responsible  24-38 

and  family  property  30 

and  irresponsible,  contrasted      285 
control  of  birth  rate  by 

26-27,  285-286 

implies  self-protection  32 

impossible  with  promiscuity  27 

only  a  partial  extrication 

from  want  35 

Patents 

see  Copyrights  and  patents 
Paupers,  treatment  of  312 

Philanthropy,  productive  106 

Police  power  of  states 

240,  241-242,  247-250 
Politician,  type  of  old-time 

predator  17-18 

Polyandry  29 

Polygamy  29 

Population 

and  production,  favorable 

balance  between  36-37 

congested,  food  supply  of         11-12 
congestion  of  34,  297-298 

effect  on,  of  standard  of 

living  .  288-289 

increase  of,  in  United 


States,  1876-1925  364 

under  control  395 

stationary  25 

three  ways  of  thinning  305 

Population  problem  280-315 

Pound,  Roscoe,  quoted  10 

Poverty 

a  problem  of  low  wages 

and  unemployment  39 

and  feeble-minded  350 

nationalism  the  agency  for 

control  of  37 

of  a  submerged  element  38 

Power 

as  the  mover  of  matter  22 

kinds  of,  used  in  American 

industry  389 

sources  of  22-23,386-387 

see  also  Horse  Power ; 

Man  power;  Machinery;  Solar 
energy 
Predation 

and  government  16-17 

competition  in  20 

in  business  methods  20 

not  an  escape  from  want  19 

opposite  to  production  19 

"productive"  forms  of  15-16 

protection  of  production  from 

(Extrication  No.  4)  14-21 

waste  of  effort  caused  by  15 

Price 

see  Equilibrium  price ;  Value 
Procreation,  bisexual,  methods  of    28 
Production 

and  population,  favorable 

balance  between  36-37 

competition  in  20,  139 

increase  in  cost  of,  a  check 

on  expansion  340 

opposite  to  predation  19 

protection  of  (Extrication 

No.  4.)  14-21 

reciprocity  among  factors  of 

328,352 
Productive  achievement  94-95 


INDEX 


429 


Productive  activity- 
directed  by  standards  of 

conduct  153-154 

essential  to  prosperity  128,  129-130 
Productive  povper,  opportunities 

for  development  of  93-94 

Profit  90-91 

Profiteering,  effects  of  392-393 

Profits  204-206 

and  wages,  division  between 

331,349 
marginal  321,322 

tendency  of,  to  decrease       324,325 
Profits  system 

and  the  feeble-minded  350 

labor  reserves  not  required  by    342 
logical  results  of  347-348 

Prohibition  102 

and  diffusion  of  prosperity 

382-383,  394 
attacks  on,  dangerous  to  labor    398 
Promiscuity 

difficulty  of  suppressing  28 

incompatible  with 
responsible  parenthood  27 

Property 

and  parental  responsibility     29-30 
communal  30 

family  29-30 

institution  of 

a  privilege  84-85,  86 

basic  fact  in  85-86 

how  evaluated  83-86 

protected  by  due  process 

of  law  233-23S 

safeguarded  by  suppression 

of  violence  31 

subject  to 

power  of  eminent 

domain  355-256 

power  of  taxation  256-259 

Prosperity 

a  by-product  of 

sound  ideals  92,  96,  103, 105 

demoralizing  in- 
fluences of  412-413, 414 


diffusion  of  76,  3Si,  370-371 

by  opportunities  for 

education  166-167 

by  productive  methods  19 

furthered  by 

prohibition  382-383, 394 

hindrances  to  77-78 

how  halted  396-397 

needed  38-39 

principles  underlying       104-105 

founded  on  usefulness  95-96 

how  long  will  it  last?    104,391-398 

mankind  not  schooled  for     413-414 

three  factors  in  128-129 

United  States  as  object 

lesson  of  91-92,  108 

uses  of  412 

what  will  it  do  to  us?  399-415 

Protection 

of  national  territory  31-32 

of  property  3° 

Protectionism  112,  113,  114 

Purchasing  power 

diffusion  of  371-372,373 

reservoirs  of,  in  the  masses         100 

R 

Race  as  basis  for  legal 

classification  252-255 

Radical  thinking,  basic 

error  of  19 

Radicalism  and  liberalism       122-123 
Railroads,  stockholders  of  379 

Rape,  social  control  of  28 

Recidivists  among  criminals   312-313 
Reciprocity,  principles  of,  among 

factors  of  production       328,  352 
Reformation,  the  223 

Religion 

and  service  95 

democracy  in,  not  necessarily 
liberal  123-124 

Republican  Party  113-114 

Resources,  natural 

see  Natural  Resources 


430 


THIS  ECONOMIC  WORLD 


Responsible  parenthood 

(Extrication  No.  6)  24-38 

see  also  Parenthood 

Rewards,  economic  211-212 

determined  by  usefulness  213 

Ripley,  W.Z.  177 

Roman  law  183 

"law  of  nature"  theory  in  221-222 

Rush,  Benjamin  102 

Russell,  Bertrand  138 
Russia,  effect  of  Lenin's  policy  in    116 


Savings  deposits  in 

United  States  374-378 

occupational  distribution  of 

376-377 

Scarcity 

a  source  of  human  conflict  10 

importance  of  215 

see  also  Want 

Scattering  (Extrication  No.  i)        7-9 
of  plant  life  8 

Seduction,  social  control  of  28 

Self-development,  opportunities 

for,  in  United  States  93-94 

Self-government,  learned  by 
experience  under  au- 
thority 182-183 

Servants  304.307.  3i9,  320, 

391,401,402 

Service 

and  religion  95 

evaluation  of  163 

the  basis  of  greatness        95-97,  161 
wealth  a  means  of  106-108 

Sex  as  basis  of  legal 

classification  251-252, 258-259 

Slavery  183 

machinery  a  substitute 
for  304-305,  401,  402 

Slums  75-76, 403 

Smith,  Adam  160 

Sobriety 
encouragement  of  101-103 

see  also  Intemperance ; 


Prohibition 
Social  esteem 
importance  of,  for  business 

enterprise  S8-59, 62 

value  of  41,211-212 

Socialism  52-53,80,113 

and  competition  140 

see  also  Communism 

Solar  energy,  future 

source  of  power        387,  390,  395 
Specialization  of  occupation 
forms  of  39 

produces  inequalities  3Q-40 

Specific  performance  of 

contracts  265-270 

Standard  of  living  63 

and  equilibrium  wage 

rate  49.332,335 

and  independence  of  labor  346 

control  of  birth 

rate  by  287-289, 395 

too  much  dependence  on  302-303 
definition  of  286-287 

Standardization  of  individual 

conduct  14-15 

Standards  of  conduct  150-151 

agencies  for  directing 

productive  energy  i53-i54 

false  and  irrational  154 

pragmatic  test  of    154-155,  156,  157 

social  value  of  151,  160,  161 

illustrated  152-153 

Static  condition,  illustration  of, 

in  balance  of  nature  44-45 

Status 

and  contract  131,  168,  169,  263 

definition  of  169 

Steam  power  22,383 

Stevenson,  Robert  Louis,  quoted     157 
Strachey,  J.  St.  Loe,  quoted  90 

Struggle  for  existence  4,  iS7-i59 

Subsistence 

and  life,  Malthus' 

doctrine  on  282-289 

problem  of  4 

see  also  Food 


INDEX 


431 


44 


Supply  and  demand, 

equilibrium  of 
Surplus  above  necessaries 

of  life  37-38.  39 


383 

42 

256-259 


Taussig,  F.  W. 
quoted 

Taxation,  power  of 

Technicians 
see  Enterprisers 

Thrift 

and  the  accumulation  of 

capital  60, 63 

discouragement 

of  77.356,357.397 

results  of  327-328,332,337 

the  basis  of  capitalism  HQ 

Trial  and  error,  method  of 

better  results  produced  by  79-80 
in  solving  problems  of  poverty  37 
the  way  of  all  progress        4H-4i5 


U 


271-273 


39 


Undue  influence 
Unemployment 

and  problem  of  poverty 
from  interference  with 

equilibrium  wage  46,  339 

occupational  congestion 

a  cause  of  298-301 

remedy  for  107-108,  333 

United  Bank  and  Trust 

Company,  Tucson  381 

United  Kingdom 

see  England ;  Great  Britain 
United  States 

agricultural  productivity 
in,  compared  with  foreign 
countries  61 

as  object  lesson  of 

prosperity  91-92,  108 

communism  and  socialism  in      114 


communistic  societies  in       170-171 
decline  of  death  rate  in, 

1880-1924  364-365 

education,  expenditures 

for  365-366 

educational  ideals  of  93,  368 

see  also  Education 
endowments  of  colleges  and 

universities  in  3^7 

factors  in  prosperity  of  93-93 

immigration  to,  1871-1924  364 

liberalism  in  111-112,114 

materialism  in 

91-92,  93,  94,  102-103,  105,  367 
national  purposes  of  92 

population  increase  in, 

1876-1925  364 

power  used  in  389 

productivity  per  worker  in  61 

in  coal  mining  386 

in  steel  industry  384-385 

prosperity  of  wage 

workers  in  391-394 

public  lands  in  368 

real  wages  in,  compared 

with  foreign  countries       62,  370 
savings  deposits  in  374*378 

wealth  in,  1870-1922  362-363 

see  also  Constitution 
Universities,  relic  of  monastic 

spirit  in  3^5 

see  also  Colleges 
Usury  laws  244-275 

Utility  theory  of 

value  207-208,209-210 

practical  application  of  211 


Value 

cost  and  utility  theories  of  207-208 

determined  by  practical 

choices  210 
Violence,  repression  of   iS,  84-85,  129 

competition  regulated  by  139 

Volstead,  Andrew  102 


432 


THIS  ECONOMIC  WORLD 


Voluntarism 

and  liberalism  112 

and  productive  activity  129 
depends  on  freedom  of  choice     187 

economic  168,  169 

and  contract  131 

in  institution  of  property  84-85 

Voluntary  agreement 
advantage  of,  over 

authority  173-180 

efficiency  of  179-180 

how  far  can  it  extend  ?  180-189 

spread  of,  with  democracy  173 

substituted  for  authority  132 


W 


46 


Wage  scale,  artificial 
Wage  workers 

as  shareholders  in  industry         380 
changing  condition  of  262 

independence  of  342,  343,  344 

investments  by  374-381 

prosperity  of,  in  United 

States  391-394 

should  support  immigration 

restriction  394 

Wages 

and  poorly  managed 

industries  59,  77,  99,  382,  408 
and  profits,  division  between  331 
high,  associated  with  machine 

production  326-327 

real,  in  foreign  countries 

and  United  States  62,  370 

see  also  Equilibrium  wage 
Want 

driving  force  of  4 

escape  from  3-69 


Water  power  aj 

Wealth 

broadened  concept  of,  as 

means  of  service  106 

concentration 

of  77,202,316-217,371 

earned  and  unearned  88,  400 

enjoyment  of  407-408 

in  the  United  States, 

1870-1922  363-363 

inherited  400 

investment  of,  in  productive 

opportunities  loi,  107 

not  to  be  consumed  in 

leisure  98-99, 381 

per  capita,  in  England, 

France  and  Germany  363 

tangible  forms  of,  limited    354-355 
through  enrichment  of  fellow 

men  91 

to  be  expended  on 

production  99-101,  107 

see  also  Capital ;  Prosperity 
Weisman  theory  of  stability  of 

germ  plasm  146,  147 

Western  Union  Telegraph 

Company,  stockholders  of        379 
Wheeler,  Wayne  B.  102 

White,  William  Allen,  quoted    70-71 
Wind  power  22 

Work  (Extrication  No.  2)  9-13 

consists  in  moving  pieces 

of  matter  21-22 

necessity  for  82,  93 

quality  or  quantity  in 

measuring  197-198, 202-203 

real  value  of  207 


